Securing compliance : seven case studies 0802027105 9780802027108

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Securing Compliance

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Securing Compliance: Seven Case Studies

edited by M.L. Friedland

UNIVERSITY OF TORONTO PRESS Toronto Buffalo London

www.utppublishing.com University of Toronto Press 1990 Toronto Buffalo London Printed in Canada ISBN 0-8020-2710-5

Printed on acid-free paper

Canadian Cataloguing in Publication Data Main entry under title: Securing compliance ISBN 0-8020-2710-5 1. Sanctions (Law) - Case studies. 2. Reward (Law) - Case studies. 3. Law enforcement - Case studies. 4. Sociological jurisprudence - Case studies. I. Friedland, M.L. (Martin Lawrence), 1932K258.5421990

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Contents

Acknowledgments / vi Contributors / vii Introduction / 3 1

Enforcing Canada's Prostitution Laws, 1892-1920: Rhetoric and Practice / John McLaren and John Lowman / 21

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Controlling Interests: Two Conceptions of Order in Regulating a Financial Market / Philip C. Stenning, Clifford D. Shearing, Susan M. Addario, and Mary G. Condon I 88

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Tax Evasion: Searching for a Theory of Compliant Behaviour / Neil Brooks and Anthony N. Doob I 120

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Regulating Traffic Safety / Martin Friedland, Michael Trebilcock, and Kent Roach I 165

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Persuasion, Penalties, and Prosecution: Administrative v. Criminal Sanctions / Richard Brown and Murray Rankin I 325

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The Effect of Environmental Regulation: Mercury and Sulphur Dioxide / Donald N. Dewees I 354

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Family Violence: A Study in Social and Legal Sanctions / John Hagan, Carol Rogerson, and Bill McCarthy I 392

Acknowledgments

The Canadian Institute for Advanced Research has made this collection of studies possible. An earlier volume, Sanctions and Rewards in the Legal System: A Multidisciplinary Approach, also sponsored by the institute, was published last year. Dr Eraser Mustard, president of the institute, has been a constant source of inspiration and encouragement to all of us engaged in the program on sanctions and rewards. Further, the institute's Law and Society Advisory Committee, chaired by David Johnston, principal of McGill University, has also played an important role in helping shape our work. The contributors to this volume met together on several occasions to discuss individual projects as well as the overall theme of the volume. The interaction proved to be valuable as we produced our separate contributions, including my introduction to this volume. I am grateful for the advice and guidance given by Professor Roderick Macdonald of McGill University, present director of the institute's Law and Society Program, and by my colleagues at the Faculty of Law, particularly Robert Prichard, Kent Roach, and Michael Trebilcock. I am also indebted to a number of other persons for their expert assistance: to Kathy Tzimika for her secretarial work; to Virgil Duff, managing editor of the University of Toronto Press; to John Parry for his copyediting; to Michael Armstrong, Neville Austin, and Fred Peltcher for proof-reading and checking references; and to Kathryn Hough and Dorothy McKinnon of the institute for their administrative expertise. Martin L. Friedland Faculty of Law University of Toronto

Contributors

Susan M. Addario is a research associate, Centre of Criminology, University of Toronto. Neil Brooks is a professor of law at Osgoode Hall Law School, York University. Richard Brown is an associate professor of law at the University of Victoria, currently on leave. Mary G. Condon is a junior fellow, Centre of Criminology, and a doctoral candidate in the Faculty of Law, University of Toronto. Donald N. Dewees is a professor in the departments of economics and law, University of Toronto. Anthony N. Doob is a professor of criminology and psychology at the University of Toronto. Martin Friedland is a professor of law at the Faculty of Law and Centre of Criminology, University of Toronto. John Hagan is a professor of law and sociology at the University of Toronto. John Lowman is an associate professor, School of Criminology, Simon Fraser University. Bill McCarthy is an assistant professor, Department of Sociology, University of Victoria. John McLaren is Lansdowne Professor of Law at the University of Victoria.

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Contributors

Murray Rankin is a professor of law at the University of Victoria. Kent Roach is an assistant professor of law at the Faculty of Law and Centre of Criminology, University of Toronto. Carol Rogerson is an associate professor of law at the University of Toronto. Clifford D. Shearing is a professor of criminology and sociology, Centre of Criminology, University of Toronto. Philip C. Stenning is an associate professor of criminology, Centre of Criminology, University of Toronto. Michael Trebilcock is a professor of law and director of the Law and Economics Programme at the Faculty of Law, University of Toronto.

Securing Compliance

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Introduction

Seven studies of compliance with the law are set out in this volume. The subjects range from securities regulation and prostitution to environmental protection and family violence. Also included are studies of compliance with tax laws and workplace safety and an extended analysis of techniques for regulating traffic safety. In an earlier collection, Sanctions and Rewards in the Legal System: A Multidisciplinary Approach (Toronto: University of Toronto Press, 1989), ten scholars examined the subject from the perspective of their own disciplines. Those earlier papers were designed to give insights into strategies and approaches that would assist us in this further stage of the sanctions-and-rewards program as well as to enable us to place our work in the context of general theories of compliance. We carry the questioning and analysis further in this volume. Why do people comply with the law? What approach do regulators take to enforcing the law? What techniques are most effective in gaining compliance? Are rewards better than sanctions? To what extent does civil liability affect conduct? What is the role of licensing in controlling behaviour? Do we rely too much on sanctions? Is it better to concentrate on 'designing out' undesirable conduct? We examine these questions by looking at specific areas of law. Models of Enforcement A distinction can be drawn between two models of enforcement. One relies on prosecution, the other on non-coercive methods for gaining compliance.1 The former - the sanctioning, deterrence, or penalty

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Securing Compliance

model - has symbolic importance. As Thurmon Arnold stated: 'There are two very distinct problems of criminal administration: first, the keeping of order in the community; and, second, the dramatization of the moral notions of the community.'2 In chapter I of this volume, John McLaren and John Lowman's study of prostitution between 1892 and 1920 in three major cities in Canada shows such a diversity of approaches. Indeed, the authors identify four different dominant approaches, or, as they call them, 'discourses,' operating during that period. The 'moral discourse' on prostitution was the dominant legislative approach. In 1913, for example, as a result of the social purity movement, amendments to the criminal code expanded the bawdy-house provisions, introduced the offence of being a 'found in,' and added the punishment of whipping as a possible penalty for a second conviction for procuring. The police, in contrast, adopted a 'public order discourse.' 'Criminal law sanctions were employed,' McLaren and Lowman write, 'but not with the object of suppressing prostitution. A primary objective was to demonstrate to the practitioners of prostitution that they were at the mercy of the police, who could as easily prosecute them as turn a blind eye.' Prostitution law enforcement, they argue, 'has often served as a form of all-purpose control device to facilitate general ordering of the streets and, in the process, to control other disreputable groups. Enforcement and charges have, therefore, often been used to acquire information about other forms of criminal conduct, such as drug trafficking, that are perceived to be much more dangerous than prostitution itself.' In addition to these 'conflicting ideologies' was a form of 'pragmatic tolerance' discourse, whereby prostitutes were unofficially confined to and left undisturbed in 'red light' districts. Further, there was the 'public health' discourse which proceeded from 'a firm conviction that its practitioners needed to be controlled and, if necessary, repressed, in order to minimize the public health risks associated with the sex trade.' A further possible approach, which has so far been rejected in Canada but accepted in the state of Victoria in Australia and in a number of western European countries and recently recommended by a Canadian government report,3 is a system of official licensing. The various discourses operating simultaneously in Canada in the field of prostitution, McLaren and Lowman conclude, suggest 'that the

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Introduction

state is not invariably a monolithic entity, harmoniously striving to secure certain agreed interests.' A similar analysis is applicable to prostitution in Canada today and could be used for almost any other area of law: drugs,4 drunk driving, abortion, pollution, family violence, and many more. Different techniques are adopted by different agencies and even by the same agency at different times and in different regions.5 In chapter 2, Philip Stenning, Clifford Shearing, Susan Addario, and Mary Condon show the two techniques operating simultaneously in their study in this volume of the regulation of financial markets. The public regulator - the securities commission - they state is concerned primarily with the sanctioning model, or what they call 'symbolic' order. The task of the 'symbolic' regulator is to enforce the rules, principally by detecting violations and violators. The essentially self-regulated stock exchange, in contrast, is concerned about what they call 'behavioural' ordering. This can be achieved, they write, 'through any number of strategies, including sanctions, threats, rewards, incentives, persuasion, design of facilities, and ideological manipulation, that might produce the desired result.' Perhaps the difference in approach is explained by the relative cohesiveness of exchange members. As Peter Grabosky has observed: 'All else equal, social groups become more punitive and administer sanctions with greater formality as the relational distance between members widens.'6 It would be instructive to apply the analysis in chapter 2 to a specific subject within securities regulation. Insider trading would be a good area for further study because of the various civil, criminal, disclosure, and licensing techniques now used to try to control the practice. Are the recent prosecutions by the us Securities and Exchange Commission an example of symbolic ordering? Are other techniques for curtailing insider trading more effective: timely disclosure of significant information by the company? public reporting of trades by insiders? civil actions for so-called short-swing trades by insiders? To what extent does the New York Stock Exchange, in contrast to the Securities and Exchange Commission, follow a 'behavioural ordering' policy in this area? Stenning and Shearing had themselves made such a distinction in an earlier paper,7 analysing why Disney World can operate so effectively without being heavy handed: 'In contrast to other forums, where sanctions are central but order is less secure, the ordering of Disney

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Securing Compliance

World is a matter less of sanctions than of opportunity management.' In chapter 2 the authors conclude: 'We have developed the same argument and reached the same conclusion in relation to a very different and considerably more consequential terrain - namely, financial markets.' Control of Opportunities The control of opportunities8 arises in many of the other areas explored in this volume. Deducting income at source, for example, reduces the opportunity for cheating on taxes. There are many examples in the traffic area. Steering-wheel locks lessen the opportunity for car thefts.9 Controlling the location of licensed pubs affects the extent of impaired driving.10 Requiring padded dashes and safety belts makes injuries less severe." Will the controlling of opportunities or the introduction of safety features have an undesirable effect on conduct? No doubt some adjustment - or, as it is often called, displacement or compensation will take place. Cars with steering locks that make them difficult to steal may well cause an increase in the thefts of older cars without such locks.12 Intensive police enforcement in one area of the city may cause some increase in crime in other areas.I3 But, in general, it would appear that such displacement does not undo the benefits of decreasing opportunities for wrong-doing. These issues are explored in the traffic study in this volume (chapter 4), by Martin Friedland, Michael Trebilcock, and Kent Roach. The authors accept that 'there will be some adaptive behaviour in drivers to safety features. Studies that show, for example, that drivers with studded tires take curves on icy surfaces faster than drivers without such tires are not surprising.' Nevertheless, in the case of seat belts, they state: 'It is unlikely that drivers will increase their driving risks just because they are belted. Drivers do not want to experience an accident, even if it is less severe than it might otherwise be without the driver being belted.' A thorough recent study of the effect of removing carbon monoxide from the gas supply in England in the 19605 is very instructive on the question of displacement.I4 Suicide by domestic gas had accounted for over 40 per cent of suicides in England in 1963. The lethal quality of the gas was, however, almost completely eliminated between that year and

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Introduction

1975. Between those years the annual number of suicides by all causes declined from 5,714 to 3,693, at a time when suicides continued to increase in most other European countries. The study clearly shows that 'blocking opportunities, even for deeply motivated acts, does not inevitably result in displacement... and the demonstration considerably strengthens the case for opportunity-reducing or "situational" means of crime control.'15 Compliant Behaviour

Neil Brooks and Anthony N. Doob's paper on tax evasion in this volume (chapter 3) addresses the question of why taxpayers obey the law. Our system of voluntary compliance obviously requires a high level of compliance to be effective. The authors sent what they describe as a 'small-scale survey' to 900 randomly selected people and received an effective response rate of 33 per cent. Using the survey results, they examined the major premises that underlie standard deterrence theory. The survey found that 24 per cent of respondents reported that they had committed one or more forms of tax evasion during the previous five years, a result not dissimilar from a number of earlier American surveys. From their survey, however, Brooks and Doob conclude that deterrence is not a major explanation for tax compliance. For example, only 27 per cent of those who report complying with the income tax law (76 per cent of the sample) would evade even if they had a safe opportunity to do so in the future. In contrast, theoretical economic analysis, they state, has assumed that 'taxpayers are perfectly amoral, risk-averse, and utilitymaximizing ... The underlying assumption of the standard microeconomic model is that individuals, in their quest for maximum utility, take advantage of all opportunities available to them.' The authors continue: 'Although we used economic, sociological, and psychological conceptions of rewards and punishments, our results would suggest that, at least in tax compliance, these theories have limited explanatory power.' They suggest that the answer may be found in the relatively new field of behavioural decision theory which uses the concept of heuristics, or rules of thumb:16 The insights of one emerging area of study, sometimes referred to as behavioural decision theory, hold some promise. Kahneman, Slovic, and

8

Securing Compliance Tversky, and others, building on the psychological literature on limited rationality, have explored the various simplifying strategies, or heuristics, that people use in making decisions. Instead of viewing human behaviour as the result of conscious and rational choice (on the basis of full information), they suggest that it can often be better explained by looking at the way in which individuals frame or view decisions and the relatively simple guidelines they use in resolving them. A number of authors have suggested that this approach should be applied to tax compliance.

Brooks and Doob are continuing their analysis of this area, using a more sophisticated survey. It is possible that they will be able to work with Revenue Canada in the future to engage in a randomized, controlled field experiment, a technique that is seldom used in the legal system but can, it would seem, offer the best guidance to the effectiveness of various research strategies.17 The tax enforcement system can give us insights into general questions of compliance. Why is it that, according to Brooks and Doob, 'the system appears to work reasonably well,' yet the criminal law is very rarely invoked and virtually no one is sent to jail?18 There are less than 300 prosecutions each year in Canada or England for tax evasion. The prosecuting authorities select clear-cut cases to prosecute. In England the success rate is over 95 per cent.19 By prosecuting clear cases, the authorities are more or less assured that other taxpayers will not sympathize with the wrong-doers, and thus the 'dramatization of the moral notions of the community,' to use Thurmon Arnold's phrase, will be more starkly presented. For the most part, National Revenue relies on behavioural ordering such as matching income with disclosure, audits, and reassessment. National Revenue's techniques can be contrasted with the extensive use of criminal law to enforce road traffic laws. Techniques for Regulating Conduct In chapter 4, Friedland, Trebilcock, and Roach explore the various techniques that have been applied in an attempt to regulate traffic safety. Most of the effort to control accidents in the past has concentrated on changing driver behaviour, particularly through the use of surveillance and prosecution. The prevalence of deterrence methods can in part be

9

Introduction

explained by the introduction of the automobile just as methods of policing were shifting emphasis from inspection and compliance to apprehension and the 'deterrence model of policing.'20 There are today over a million convictions a year in Ontario for violations of traffic laws. The overall impression of the authors is that 'we have concentrated and continue to concentrate our resources too heavily on changing driver behaviour' and that 'switching some of the resources now devoted to policing and prosecutions to improving car and road design and to curtailing activity levels of high-risk classes of drivers would ... improve road safety.' This is, however, just an impression, because as in most areas examined in this volume we do not know the relative effectiveness of the various possible interventions. Chapter 4 questions the widespread use of criminal sanctions. Not only are there practical and philosophical limits on the extent to which criminal law can be used to affect behaviour, but even if criminal prosecutions can effectively control conduct, their study questions whether this will affect accidents. Studies of accident rates during police slowdowns and studies of the relationship between drunk driving arrests and alcohol-related accidents cast doubt on the relationship between targeted conduct and accidents. An Epidemiological Approach Legislators, lawyers, and the police tend to think that the law is the best way of controlling human behaviour. Of course, the existence of a law may affect behaviour.21 Passage of a seat-belt law, for example, will by itself significantly increase use. But it will not be as effective as requiring the use of automatic belts. Friedland, Trebilcock, and Roach show that we have much to learn from the epidemiologists who adopt an approach similar to the control of opportunities discussed earlier. Starting in the 19505 and promoted by epidemiologist William Haddon, Jr., in the 19605 and 19705, attention was no longer exclusively focused on drivers' care levels and the prevention of crashes, as physicians, researchers, and eventually policymakers began to realize that the damage sustained in crashes could be reduced by other forms of regulation, such as seat belts.22 The so-called Haddon matrix (see introduction, chapter 4), which now provides the analytic framework for much work in traffic safety,

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Securing Compliance

distinguishes human, vehicle, and environmental factors in accidents and temporally breaks down accidents into pre-crash, crash, and post-crash phases for analysing potential interventions. While this analysis is not easily transferred to other areas of human activity, comparable frameworks could help evaluate various possible interventions in these other areas. Rewards The authors of chapter 4 explore the epidemiological approach, along with a number of other possible interventions. Rewards (see section 3), for example, could be more widely used than they are now. Many institutions, including religious bodies, prisons, universities, and businesses, rely more on rewards than sanctions. This use could be expanded to other areas. In addition to rewarding good drivers through the insurance system, we could, for example, give free licence renewals, or lottery tickets with the chance of a substantial prize, for drivers who do not have accidents or traffic tickets. Civil Liability Civil liability (section 2) can be useful in controlling traffic accidents, both by reducing exposure levels and by creating incentives to take care. Insurance (also section 2), however, has blunted the deterrent effects of civil liability. In designing a compensation system, whether a faultbased tort system with insurance or a no-fault system, we should be sensitive to the deterrent aspects of the design.23 The deterrent effect of tort liability may, of course, operate differently in different fields. As Robert Rabin stated in his paper on 'Deterrence and the Tort System' in the earlier volume of essays, 'There is no reason to think that doctors, drivers, and drug manufacturers respond similarly to the prospect of tort liability.'24 Licensing Licensing - a technique that is as widespread throughout the legal system as it is understudied - offers the possibility of significant results, the authors argue in section 4, by reducing or controlling the exposure of

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Introduction

high-risk drivers. Inexperienced drivers, for example, could be subject to greater restrictions on the use of alcohol than other drivers, and speed limits for such drivers, to take another example, could be at the lower range of reasonable driving speeds. Traffic deaths do not vary to any considerable extent between Canada and the United States. In contrast, a comparison can be made between the very high rate of handgun deaths in the United States and the relatively low rate in Canada - twenty times lower. The question is raised 'whether some of the licensing techniques that have controlled the exposure of high-risk handguns in Canada cannot be more widely used, albeit in a modified form, to control the exposure of high-risk, if not all drivers.' The authors conclude their paper by stating: No one technique of control is the entire answer. Controlling exposure through licensing, for example, may well reduce the number of accidents, but there will still be a vast quantity remaining. Prosecutions, civil liability, rewards, highway design and maintenance, vehicle safety, and post-accident procedures all have some impact on the frequency and severity of traffic accidents. What we do not know, however, is where lies the greatest pay-off on the marginal dollar devoted to traffic safety. This is the central policy issue that traffic safety research has barely begun to confront.

Prosecutions v. Administrative Penalties Richard Brown and Murray Rankin provide, in chapter 5, a useful model of the type of empirical research that can provide insights into the effectiveness of different techniques of enforcement. They compare the sanctions used by two sections of the government of British Columbia: the Workers' Compensation Board (administrative penalties) and the Waste Management Branch (criminal penalties). They conclude that criminal prosecution is not as effective as administrative penalties. The Waste Management Branch obtained only twelve convictions in British Columbia in 1986, with an average fine of a little over $500. In contrast, the Workers' Compensation Board assessed over 300 administrative penalties, with an average penalty of over $3,500. Both agencies rely initially on persuasion to achieve their objectives. This is consistent with the operations of other regulatory agencies in

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Securing Compliance

Canada25 and England,26 but less so with those in the United States, where the agency appears more likely to use an enforcement model.27 The difference between the United States and Canada may be partly a result of the greater use of inspection in Canada. Paul Weiler has pointed out that us firms are on average inspected by occupational health and safety officers once every ten years, whereas in Ontario it is once a year.28 The important work of inspectors in persuading compliance, often working closely with inspectors employed by private industry, is just now beginning to be understood.29 Persuasion has obvious advantages. Punishment, for example, can interfere with the educational role of regulators, and penalties may inhibit a regulated firm from soliciting an inspector's advice for fear that the revelation of compliance problems will invite punishment. Nevertheless, the data collected by Brown and Rankin show 'that a substantial number of firms habitually violate environmental and occupational health and safety regulations, despite the efforts of regulators to persuade them to comply.' In some such cases, the regulators switch tactics, relinquishing persuasion in favour of punishment, but all too often they do not. Brown and Rankin assume that penalties can have a deterrent effect. The willingness of regulators to invoke punishment is a function of the type of sanctions available to them. Administrative penalties have a number of significant advantages for regulators: 'The administrative process responds to risk rather than to harm, does not unduly stigmatize offenders who are thought not to warrant moral opprobrium, applies a standard of absolute as opposed to strict liability in at least some cases, entails minimal operating costs, and imposes monetary penalties large enough to have a reasonable prospect of deterring offenders.' 'Criminal prosecution, the most common sanction of last resort among Canadian regulatory agencies,' state Brown and Rankin, 'scores poorly on all these counts.' They advocate that regulators should be given a choice between using administrative and criminal sanctions: 'Both administrative and criminal penalties should be included in the regulatory arsenal. An enforcement strategy that allows the more appropriate sanction to be chosen on a case-by-case basis offers the best of both worlds. Criminal prosecution is available for the worst offenders. Yet administrative penalties can be assessed against offending firms that would escape punishment entirely if prosecution were the only sanction available.'

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Introduction

The regulation should, to use the language of Stenning and Shearing, have the choice of symbolic or behavioural compliance in individual cases.30 Compliance with Occupational Safety and Pollution Control Laws A full study of compliance in occupational safety or environmental pollution control would involve thorough investigation of many other techniques of control, 3I including inspection, education, rewards, licensing, experience rating, publicity,32 tort liability, collective bargaining action, and 'internal responsibility' systems. A recent Law Reform Commission of Canada study of workplace pollution33 identified the so-called internal responsibility system (whereby the prime focus of responsibility to control occupational risks rests by legislation with the employer, the supervisor in the workplace, and the worker) as 'perhaps the most distinctive feature of Canadian occupational health and safety law.' Another unique feature in the protection of the workplace is the Quebec scheme, whereby the firm specifies a prevention program outlining the steps that will be taken to comply with the law and the time by which the steps will be taken. A refundable safety bond is posted to ensure compliance.34 Another interesting feature of safety programs is the incentive games such as 'safety bingo' (described in the traffic study) that give an incentive for thinking about safety and also introduce peer pressure by fellow workers to take care. An important question raised by Christopher Stone in the earlier volume of essays deals with the appropriate target of the various control strategies: should it be the agent that actually causes the harm, or the enterprise, or both? Should the law target part of an enterprise, such as a corporate division or a plant? Should advisers such as auditors and lawyers be liable for the client's wrong-doing?35 Who should monitor and enforce the rules?36 Another issue that merits careful exploration is the use of court-ordered techniques such as probation or injunction or other methods to require a corporate defendant to change its internal disciplinary system. As Fisse and Braithwaite state: 'Justice for individuals might be meted out by private justice systems monitored, as a safeguard against inaction or scapegoating, by the public justice system... Even though the sanctions available to private justice systems - fines, dismissals, demotions, shame - may be less potent than some of

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Securing Compliance

those available in the public arena, it seems better to have weaker sanctions hitting the right targets than stronger weapons pounding the wrong targets. In any case, if one believes that peer group shamings and other local pressures provide more effective sanctions than formal punishments imposed by the state, then private justice systems might even be seen as providing more potent sanctions.'37 In Ontario, unlike in many parts of the United States, the possibility of a right of action has been completely taken away from an injured worker. The firm pays an assessment to the Workers' Compensation plan based on the average cost of paying for all the accidents occurring in that industry. Ontario has recently introduced experience rating in certain industries (e.g. construction, forestry, and trucking) to reflect the firms' individual experience. It will be instructive to learn whether experience rating has affected the accident rate in Ontario. There is, of course, much overlap between workers' compensation schemes and traffic safety. Over one-quarter of all workplace deaths are a result of transportation,38 and the number of workers' deaths on the highway, on and off the job, is very much higher than accidents on the job.39 A thorough case study of the control of, say, trucking accidents might shed much light on methods of compliance. Case Studies of Environmental Regulation More case studies, such as that by Donald Dewees, would help us understand how effective are different techniques of control. In chapter 6, Dewees analyses two specific case studies of environmental regulation in Ontario to test whether governmental regulatory activity significantly affects the rate of pollution discharge. The first case, a study of mercury discharge from chlor-alkali plants, Dewees writes, 'appears to represent a major success for regulatory agencies. Mercury discharges were reduced 95 per cent in one year and within three years were less than one percent of their 1970 amount.' The second case dealt with efforts to limit sulphur dioxide discharges (which cause acid rain). This, Dewees says, 'appears to be a regulatory failure ... The reduction in discharge in Ontario between 1970 and 1986 amounts to only about 50 per cent.' An understanding of why there was success in one case and not in the other may give us insights into the effectiveness of various techniques of control.

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Introduction

Dewees shows that a great number of factors contributed to these outcomes. Penalties and subsidies, however, did not appear to be major considerations. The two cases differed substantially. Mercury was proved to be a serious health problem, whereas the effects from sulphur dioxide inhalation at the levels of the 19708 were speculative at best; the source of mercury pollution, unlike sulphur dioxide, could easily be traced to its source; the threat of lawsuits for mercury pollution presented potentially large recoveries; mercury pollution, unlike sulphur dioxide, could be controlled by available technology at moderate cost; and orders to clean up or even close down might be issued against mercury polluters. So the difference between the two cases is not surprising. These cases,' Dewees concludes, 'also demonstrate that examining monetary penalties levied on polluters is a poor means of assessing the pressure to abate pollution discharge.' Breadth and Complexity of the Sanctioning Process Finally, chapter 7, by John Hagan, Carol Rogerson, and William McCarthy, examines family violence from a perspective that shows the breadth and complexity of the sanctioning process. An understanding of the sanctioning process in the broadest sense may give us a better understanding of legal sanctioning. The paper begins by placing legal sanctions within a broader social context: 'Legal sanctions are merely one subset of a broad range of social sanctions: those enforced by the authority of government. Legal sanctions and other social sanctions may interact in a variety of ways, opposing as well as reinforcing each other.' Family violence can itself be viewed as a form of social control or social sanctioning that is unopposed and hence reinforced by the lack of legal sanctions, the absence of legal sanctions being explained by cultural norms of family privacy and the legitimacy of control of wives by husbands and children by parents. The authors go on to locate family violence as one element of a complex set of interrelated sanctions. In a preliminary analysis of data from their study of homeless adolescents compared to adolescents living at home with their parents, they show a link among child abuse, homelessness, and juvenile delinquency:

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Securing Compliance Overall, our model offers support for the argument that physical child abuse is associated with delinquency through an indirect causal sequence that involves the adolescents in question being pushed out of the home and that ultimately results in these adolescent victims themselves often becoming offenders and subjects of police sanctioning. In this way the law winds up responding to the symptoms rather than to the causes of child abuse. The adolescents in question apparently wind up being sanctioned by the police both for being homeless and for being involved in delinquent behaviour. In neither case are the causes of physical child abuse addressed.

Legal sanctioning is thus imposed very ineffectively and unfairly at the end of a causal sequence of events beginning with child abuse, which is legally uncontrolled and unsanctioned. Controlling Family Violence Turning to techniques of controlling family violence, Hagan, Rogerson, and McCarthy do not assume that the solution is simply to sanction, i.e. criminalize, child abuse. They argue that 'the debate about sanctions and rewards as it is currently being conducted in the public policy arena, particularly concerning spousal violence, although also to a lesser degree in child abuse, has generated a relatively limited range of options for consideration. The primary emphasis has been crisis intervention rather than prevention, with a concern to provide immediate protection to identified victims of abuse.' Interventions include use of the criminal sanction,40 often advocated for symbolic reasons, and development of effective treatment programs for abusers, directed at changing their behavioural patterns. After-the-fact interventions have drawbacks. Victims, for example, may be reluctant to report the violence, and there is an obvious disruption of the family relationship. Social and legal measures aimed at preventing violence - for example, targeting of high-risk families with parenting support services - are thus desirable. One solution that may emerge from further analysis of their data is that a change of family structure might reduce the incidence of family violence: 'If it can be shown that patriarchal family structures are associated with a higher incidence of family violence than egalitarian family structures, this may suggest that an effective, long-term solution

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Introduction

to family violence may lie in the social transformation of family structure. Such a transformation would involve, in part, a major advance in the economic position of women and their role in the work-place.' A fruitful new approach to understanding individuals' conduct is to combine the sociological study of groups (e.g. the family or the firm) with the individualistic, rational-choice approach of the economist. As Michael Hechter recently argued: 'Sociologists and rational choice theorists often assume that there is an antinomy between their two types of intellectual discourse. This is a most unfortunate view ... Whereas sociologists command knowledge of a wide array of social and institutional structures, rational choice theorists are masters at explaining how individuals behave in the face of different constraints.'41 Conclusion This collection of studies is designed to help us gain a better understanding of compliance by opening up avenues for future exploration. Many techniques have been explored in these papers. Unfortunately, we do not have a clear picture of what works and what does not work. Many of the ideas are still in the tentative, speculative stage, such as the radical thesis, offered in chapter 7, that the most effective way to control family violence is through the social transformation of family structure. Others are more modest and at the same time more certain, such as Brown and Rankin's conclusion, in chapter 5, that administrative penalties are more effective than criminal prosecutions. The studies suggest some fruitful approaches to compliance. Perhaps the epidemiological viewpoint and the comparable approach of controlling opportunities are the most promising. Licensing, which helps control opportunities or exposure, is another important technique of control. Rewards should also be carefully examined. Civil liability can, if carefully designed, have some effect on conduct. And other techniques, such as inspection, education, peer pressure, shame, publicity, and disclosure, will have to be examined in any given case. What seems reasonably clear is that exclusive reliance on criminal sanctions may not achieve the desired objectives. The occasional symbolic prosecution in clear-cut cases may, however, be useful as a

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Securing Compliance

moral lesson in helping to change attitudes by showing, as in the case of drunk driving and family violence, that the state condemns the conduct. Carefully designed further studies may offer some guidance as to which of these techniques are the most effective. Until that is done, our judges, administrators, and policy-makers will be basing their actions on the basis of hunches and guesswork. Notes 1 See A.J. Reiss, 'Selecting Strategies of Social Control over Organizational Life,' in K. Hawkins and J.M. Thomas, Enforcing Regulation (Boston: Kluwer-Nijhoff, 1984) 23; J.R. Gusfield, the Culture of Public Problems: Drinking-Driving and the Symbolic Order (Chicago: University of Chicago Press, 1981). 2 The Symbols of Government (New Haven: Yale University Press, 1935) 152. 3 Pornography and Prostitution in Canada: Report of the Special Committee on Pornography and Prostitution (Ottawa: Minister of Supply and Services, 1985) (the Fraser Report). 4 See, generally, the issue on Vice in (1988) 51 Law and Contemporary Problems i. 5 See B.M. Hutter, The Reasonable Arm of the Law?: The Law Enforcement Procedures of Environmental Health Officers (Oxford: Oxford University Press, 1988). 6 P.N. Grabosky, 'The Variability of Punishment,' in D. Black, ed., Towards a General Theory of Social Control, Vol. I (New York: Academic Press, 1984) 163 at 182. 7 C.D. Shearing and P.C. Stenning, 'From the Panopticon to Disney World: The Development of Discipline' in A.N. Doob and E.L. Greenspan, eds., Perspectives in Criminal*Law (Aurora, Ont.: Canada Law Book, 1985) 335. 8 See P.J. Cook, 'The Demand and Supply of Criminal Opportunities,' in Criminal} ustice: An Annual Review of Research, Vol. vm (1986) I. 9 See P. Mayhew et al., 'Steering Column Locks and Car Theft,' in R.V. Clarke and P. Mayhew, Designing out Crime (London: Her Majesty's Stationery Office, 1980) 19. 10 See E. Single and T. Storm, eds., Public Drinking and Public Policy (Toronto: Addiction Research Foundation, 1985). 11 See chapter 4, below. 12 Mayhew et al., 'Steering Column Locks,' 27. 13 See P.J. Cook, 'The Economics of Criminal Sanctions,' in M.L. Friedland, ed., Sanctions and Rewards in the Legal System: A Multidisciplinary Approach (Toronto: University of Toronto Press, 1989) 50 at 66. 14 R.V. Clarke and P. Mayhew, 'The British Gas Suicide Story and Its Criminological Implications,' in Crime and Justice: An Annual Survey, 10 (1988) 79.

19

Introduction 15 Ibid. 79. 16 See, e.g., D. Kahneman, P. Slovic, and A. Tversky, eds., Judgment under Uncertainty: Heuristics and Biases (Cambridge: Cambridge University Press, 1982). 17 See, generally, F.E. Zimring, 'Methods for Measuring General Deterrence: A Plea for the Field Experiment,' in Friedland, ed., Sanctions and Rewards in the Legal System 99. For a discussion of controlled'experiments in the health field see A.L. Cochrane, Effectiveness and Efficiency: Random Reflection on Health Services (London: Nuffield Provincial Hospitals Trust, 1972). 18 See also K.W. Smith and K.A. Kinsey, 'Understanding Taxpaying Behavior: A Conceptual Framework with Implications for Research' (1987) 21 Law and Society Review 639. 19 See A.K. Jain, 'Income Tax Penalty and Prosecution Provisions: A Comparison of the United Kingdom and Indian Experiences' [1987] British Tax Review 370. See, generally, A. Lewis, The Psychology of Taxation (Oxford: Martin Robertson, 1982). 20 A.J. Reiss, 'Consequences of Compliance and Deterrence Models of Law Enforcement for the Exercise of Police Discretion' (1984) 47 Law and Contemporary Problems 83 at 85. 21 See generally, RJ. Bonnie, The Efficacy of Law as a Paternalistic Instrument,' in Nebraska Symposium on Motivation (Lincoln, Neb.: University of Nebraska Press, 1985) 131. 22 See, e.g., W. Haddon, 'On the Escape of Tigers: An Ecologic Note' (1970) 60 American Journal of Public Health 2229; T. Christoffel, 'The Role of Law in Reducing Injury' (1989) 17 Law, Medicine and Health Care 7. 23 See M.J. Trebilcock, 'Incentive Issues in the Design of "No-Fault" Compensation Systems' (1989) 39 University of Toronto Law Journal 19. 24 R.L. Rabin, 'Deterrence and the Tort System,' in Friedland, ed., Sanctions and Rewards in the Legal System, 79 at 80. 25 See K. Webb's study paper for the Law Reform Commission of Canada, Pollution Control in Canada: The Regulatory Approach in the 79805 (Ottawa: Law Reform Commission of Canada, 1988). 26 See Hutter, The Reasonable Arm of the Law?; K. Hawkins, Environment and Enforcement: Regulation and the Social Definition of Pollution (Oxford: Clarendon Press, 1984). 27 D. Vogel, National Styles of Regulation: Environmental Policy in Great Britain and the United States (Ithaca: Cornell University Press, 1986); J. Braithwaite, 'Negotiation versus Litigation: Industry Regulation in Great Britain and the United States' [1987] American Bar Foundation Research Journal 559. 28 P.C. Weiler, Protecting the Worker from Disability: Challenges for the Eighties (Toronto: Ministry of Labour, 1983) 106. 29 See J.C. Clifford's study paper for the Law Reform Commission of Canada,

2O

Securing Compliance

30 31

32 33

34 35

36 37

38

39 40

41

Inspection: A Case Study and Selected References (Ottawa: Law Reform Commission of Canada, 1988). See Law Reform Commission of Canada, Workplace Pollution, Working Paper No. 53 (Ottawa: Law Reform Commission of Canada, 1986) 75. See, e.g., Law Reform Commission of Canada, Policy Implementation, Compliance and Administrative Law, Working Paper No. 51 (Ottawa: Law Reform Commission of Canada, 1986); D.N. Dewees and R.J. Daniels, 'Prevention and Compensation of Industrial Disease' (1988) 8 International Review of Law and Economics 51. See B. Fisse and J. Braithwaite, The Impact of Publicity on Corporate Offenders (Albany: State University of New York Press, 1983). Law Reform Commission, Workplace Pollution 23. See, generally, Ontario, Report of the Royal Commission on the Health and Safety of Workers in Mines (Ham Commission) (Toronto: Ministry of the Attorney General, 1976); K. Swinton, 'Regulating Occupational Health and Safety: Worker Participation through Collective Bargaining and Legislation,' in G. England and G. Lermer, eds., Essays in Collective Bargaining and Industrial Democracy (Don Mills, Ont.: CCH Canadian, 1983) 43. Law Reform Commission, Workplace Pollution 82. See, for example, the proceedings against the major accounting firms following the savings and loan crisis: 'Where Were the Accountants?' New York Times, 12 March 1989. See, generally, R.H. Kraakman, 'Corporate Liability Strategies and the Costs of Legal Controls' (1984) 93 Yale Law Journal 857; Kraakman, 'Gatekeeper Liability' (1986) 2 Journal of Law, Economics and Organization 53. C.D. Stone in Friedland, ed., Sanctions and Rewards in the Legal System 2O3ff; Introduction, 12. B. Fisse and J. Braithwaite, 'The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability' (1988) n Sydney Law Review 468 at 512-13. C. Digby and W.C. Riddell, 'Occupational Health and Safety in Canada,' in W.C. Riddell, ed., Canadian Labour Relations, Vol. 16 of the background papers of the Royal Commission on the Economic Union and Development Prospects for Canada (Toronto: University of Toronto Press, 1986) 291. See Weiler, Protecting the Worker from Disability, n. As well as the process of arrest: see L. Sherman and R. Berk, 'The Specific Deterrent Effects of Arrest for Domestic Violence' (1984) 49 American Sociological Review 261; R. Berk and P. Newton, 'Does Arrest Really Deter Wife Battery? An Effort to Replicate the Findings of the Minneapolis Spouse Abuse Experiment' (1985) 50 American Sociological Review 253. M. Hechter, Principles of Group Solidarity (Berkeley: University of California Press, 1987) 186.

1 Enforcing Canada's Prostitution Laws, 1892-1920: Rhetoric and Practice JOHN M C L A R E N AND JOHN LOWMAN

Introduction Focus of the Study The focus of this study is prostitution law and its enforcement. Although prostitution itself is not illegal in Canada, it is socially stigmatized, and much prostitution-related conduct comes under the direct purview of the criminal law. Whether viewed from a religious or secular perspective, prostitution has often been thought to be a threat to the welfare of Canadian society - for some to its physical and moral health and therefore its social cohesion, for others to the more particular and localized economic and social environments in which 'we move and have our being.' This concern about prostitution has periodically crystallized into strong, organized pressure for new and tougher criminal law and sanctions or for more vigorous enforcement of the existing criminal law to deal with problems associated with the trade. Both public pressure for the use of the criminal law against prostitutionrelated conduct, and the relative ease with which the police can move against its most visible and exposed agents, the prostitutes, mean that it has been and remains an important constituent of official crime statistics. What is particularly instructive about the study of prostitution in terms of securing compliance is that, while it has frequently been an object of censure, its resilience suggests that it is behaviour that is as much condoned as it is condemned. Despite the strong impulse to use

22

Securing Compliance

the law to suppress it, the debate surrounding what to do about prostitution in Canada has never been entirely one-sided. There have always been advocates of toleration or regulation, for reasons ranging from approval of prostitution as an outlet for sexual desire to the view that, try as we might, we will never extirpate it. As a consequence there is an intriguing range of often-conflicting ideologies relating to prostitution and the application of social and legal controls to it. Each of these ideologies has been supported by and in turn been affected by a particular mode of discourse, a means of characterizing the issue in terms of the scientific, social, moral, or psychological significance attached to it. The longer these ideologies coexist, the more the subject of prostitution bristles with controversy. This inquiry is limited to female prostitution, because it is only relatively recently that there has been official recognition of the existence of male prostitution. Such activity certainly occurred during earlier periods, but, because of the harsh nature of the law against homosexuality, it was, for good reason, clandestine. The period from 1892 to 1920 has been selected as the main focus of the study. The period was chosen because it was the era during which Canadians agonized most intensely over prostitution and what to do about it. It was the period during which the main elements of modern discourse on prostitution in Canada emerged and in which the form and substance of the legal responses to prostitution were crafted. Because of the high degree of social concern generated by prostitution at that time, there is a relatively rich record of both law enforcement practice and social discourse surrounding it. Despite the focus on that span of twenty-eight years, we have also attempted to show how the events and debates of that period grew out of the social and legal concerns of Canadians of the eighteenth and nineteenth centuries. Furthermore, we relate our findings to the subsequent development of social and legal policy surrounding prostitution. Attention is concentrated on three Canadian cities, Vancouver, Calgary, and Toronto, with passing references to other Canadian communities, both urban and rural. This focus has allowed for comparison and contrast of attitudes and actions in three urban communities possessing distinct geopolitical and demographic characteristics.

23

Enforcing Canada's Prostitution Laws Objects of the Study

Two basic strategies have competed in Western societies for dealing with problems attributed to prostitution. The first is that of licence and control. Advocates of this strategy have either accepted that prostitution possesses some social utility - for example, providing an outlet for repressed sexual urges in men which shields respectable women from their attentions - or that, however unsavory prostitution is, it is inevitable, given the nature of male sexual desire.1 Those who have espoused these positions have seen the role of the law as containment of prostitution within manageable geographic and institutional bounds. In this way, it has been claimed, its purveyors may be identified and therefore controlled, and its adverse side effects (especially sexually transmitted diseases) minimized.2 The competing strategy is that of the use of criminal law sanctions to suppress or at least punish prostitution-related activity. As with licensing, justifications vary. They range from the view that prostitution is not a social given and, therefore, should be attacked by every possible means at the disposal of the agents of the state, to the position that it should be controlled as a means of containment, a social prophylactic. Except for a brief flirtation by the pre-Confederation legislatures with the regulation of prostitution under contagious diseases legislation,3 a commitment to suppression or control through the criminal law has constituted the stated legal strategy in Canada. However, the evidence suggests that this official rhetoric has not been invariably sustained in practice. The empirical and reflective work of other researchers suggests that what passes in official statements for sanction-oriented application of the law has often amounted to a crude form of licensing, involving perfunctory and selective enforcement, with small fines for convicted offenders.4 A central purpose of the research presented here is to investigate this apparent gulf between rhetoric and practice and the reasons that explain it. Part of the study involves examination of the exercise of police and magisterial discretion in the enforcement of prostitution law and the processing of cases. Previous research suggests that, despite the dominance in official discourse of statements about the need to curb prostitution-related conduct through the application of criminal law sanctions, other

24

Securing Compliance

objectives have been served by the application of the criminal law and its penalties. For example, the official system of sanctions has aimed not only to suppress prostitution for moral reasons but also to control certain adverse social consequences, in particular, the spread of sexually transmitted diseases - the impetus to censure prostitution has been fuelled by both moral and medical epidemiologies.5 Beyond this there is evidence that enforcement of prostitution laws has often served as a form of all-purpose control device to facilitate general ordering of the streets and, in the process, to control other disreputable groups. Enforcement and charges have, therefore, often been used to acquire information about other forms of criminal conduct, such as drug trafficking, that are perceived to be much more dangerous than prostitution itself. Theoretical Considerations The overall objectives of the study are to examine how and why various logics calling for the censure or toleration of prostitution have affected the evolution of both general socio-legal policy and judicial and police practice in relation to it and how the interplay of different ideologies has translated into a definable pattern of criminal sanctions and other control mechanisms. The focus generally is directed toward discourse on prostitution, and specifically toward the 'vocabularies of censure' and 'vocabularies of resistance' to that censure that have guided the development of Canadian prostitution law arid shaped its enforcement. The several phases of the censure of prostitution are distinguished according to their differing discursive content. The point in referring to 'vocabularies of censure' and 'vocabularies of resistance' to that censure6 is to invoke several theoretical perspectives in the sociology of deviance and sociology of law that focus on the process of defining and labelling deviance. In this respect, this essay is an analysis of 'claims making activities' and what Sumner has described as a 'sociology of censure.'7 For the sake of convenience, the various vocabularies of motives described here are referred to as 'discourses,' but only through the requirements of analytic abstraction can one refer to these 'discourses' as discrete entities - in reality they often merge into hybrids or were reconstructed to suit the needs of the particular group involved in their articulation. In analysing discursive practices, the

25

Enforcing Canada's Prostitution Laws

emphasis has been on written documents in many archival sources. However, the conceptualization of 'resistance' to demands for the censure of prostitution largely omits any consideration of the actions, in either word or deed, of the people practising prostitution, since written records (other than of charges laid and/or convictions registered) are rarely available. As for the focus of this anthology - securing compliance - the focus of this essay is less the objectives of legal sanctions or other modes of securing compliance than their content and application. Thus rather than approaching the application of the law to prostitution in terms of a dichotomy between compliance and deterrence theories, this study examines the operation of power in different contexts: the power to classify behaviour as deviant; the power to translate classifications of deviance into legal sanctions; and the power to mobilize police and other resources against legally sanctionable behaviour. It also considers the loci and forms of resistance to the exercise of power to characterize prostitution as deviant and to suppress or control it. This focus on the social construction of sanctions and control mechanisms leads to consideration of the wider socio-legal context from which the various impulses to censure and explain prostitution emerge. Drawing primarily on feminist, Marxian, and Foucaultian perspectives on power and social organization, the essay analyses both the way in which religious doctrine and professional power have interacted with class and gender power structures to shape demands for more vigorous law enforcement, and for the enactment of harsher laws against prostitutes and exploiters, and the extent to which interest groups both inside and outside the state have worked against or undercut those demands. The examination of the process of legislative change and the politics of law enforcement indicates considerable tension and conflict and only occasionally compromise among various groups within and outside the state over the appropriate form of public policy on prostitution. The coalescence of apparently powerful ideological forces in a censure of prostitution met with passive defiance from the proponents of a liberal 'rights' philosophy, radical feminist detractors, and prostitutes themselves. It also seems that a variety of contradictions and conflicts occurred within the control system itself, as police motives for action were often inconsistent with prevailing ideological and moral blueprints

26

Securing Compliance

for the 'pure' society. Often the institutional contingencies of policing combined with the values of police culture stood in the way of achieving common ground with those committed to creating a more moral order by the invocation of the criminal law at anything other than the level of rhetoric. Because the exercise of discretion is fundamental to the application and enforcement of prostitution law,8 the research for this essay has focused on the socio-legal context of police decision making. In this regard the work builds on distinctions variously made by Reiss between the deterrence and compliance models of law enforcement9 and by Skolnick on the crime and peacekeeping functions of policing,10 to describe shifting patterns of police administrative policy on enforcement of prostitution laws. Discourses on Prostitution Control Prior to 1892 During the century and a half prior to enactment of the Criminal Code in 1892, a series of 'discourses' emerged around prostitution which contained various prescriptions and panaceas as to what should be done about it. The view of the state, represented by a socially conservative political establishment, was that prostitution was one form of troublesome conduct to which the 'dangerous' classes were prone and, from time to time, a source of civil disorder. This concern was formally articulated in vagrancy legislation directed against street-walkers; operators, residents, and habitues of brothels; and, later, pimps.11 Although certain of these provisions covered both male and female errancy, the selection of street-walkers as a special class of vagrant reflects the strong belief that prostitution and its adverse side effects were the result primarily of individual female pathology and immorality.12 The impulse to resolute action on prostitution that the vagrancy laws might otherwise have provided was tempered during the eighteenth and much of the nineteenth centuries by acceptance of the view that prostitution was an irrefutable fact of life and a necessary outlet for male sexual aggression. In a pioneer society in which military presence and imperatives were ubiquitous and civil policing primitive, the philosophy seems to have been that the law should only be invoked in emergency situations or to deal with the patently incorrigible offender. In the main tolerance was practised and resolute enforcement of the law resisted.I3

27

Enforcing Canada's Prostitution Laws

The practice of tolerance came into question with the rise of an urban proletariat in some of the more settled parts of the country in the second half of the nineteenth century. In communities in which there was a developing sense of unease among the political and social establishment about the potential for disorder among a burgeoning working-class population,14 a clear impulse to use the traditional law to suppress prostitution and especially prostitutes emerged. The primary agents of this 'hard line' approach were the new professional police forces, which had been established in the decades after 1850, with the purpose of securing peace and social order for an increasingly middle-class population.15 A competing, reformist discourse on prostitution emerged in Canada in the second third of the nineteenth century.16 Initially committed to working change through education and charitable effort, the reformers later developed an agenda of modifications to the law, as they began to persuade themselves that suppression of prostitution by the state was essential. They sought not to replace the traditional pattern of criminal law proscriptions but to supplement it extensively with new provisions and to see that the law, both traditional and reformed, was enforced. Concern over the apparent weakening of moral values and of the family unit in the wake of urbanization and changes in the organization of production persuaded them that the most serious shortcoming in the existing law was that it took no account of the reality of sexual exploitation of women and children.17 A major product of the campaign for reform of the law was inclusion of a complex of provisions in the 1892 Criminal Code.18 That it appears that the reformers saw no inconsistency in the law being used to suppress prostitutes and were ready to support repressive regimes to reform them suggests that they shared with social conservatives the common aim of controlling the lower classes. It was in the objectives of control that they differed. The social conservatives had no illusions about their ability to change the immoral and criminal proclivities of the lower classes, at least not in the short term. The purpose of the criminal law was essentially to order, discipline, and control the dangerous classes, by 'keeping the lid on' things. For the reformers the objectives of criminal sanctions were the reclamation and reform of offenders by detaching them from the social milieu that was seen as the source of their problems. Once they had been removed they

28

Securing Compliance

were ready for remoulding through the instilling of responsible, that is, middle-class, attitudes and values in a setting that the reformers organized and controlled. The common desire of social conservatives and reformers to control the lower classes contained within it the seeds of both discord and co-operation. On the one hand, those of a conservative bent, especially the police, prosecutors, and magistrates, did not share the instrumental and therapeutic vision of the reformers, which assumed that application of the criminal law could end prostitution, and reacted unfavourably against the more zealous elements in reformist thinking, especially where self-interest or other pragmatic considerations favoured caution. On the other hand, however, the conservatives sometimes felt inclined to identify with reformist methods, where the social and economic environment seemed to dictate repressive action. This impulse was apparent in the ranks of police forces with a strong commitment to preserving social peace by removing or containing whatever was offensive to their middle-class masters.19 Prior to 1892 it is possible to identify three main views of prostitution control in Canada. First, there was a discourse of toleration associated with the socially conservative view that prostitution could not be suppressed and should be ignored, unless it became an excuse for other, more disruptive forms of deviant conduct. In some parts of the country, however, socially conservative thinking supported a second line of discourse, which preached enthusiastic enforcement of the vagrancy laws to contain and repress prostitution, where it was seen as undermining the sense of security of the middle class. The view of the police authorities in such settings was that prostitution could be kept under wraps by vigorous and selective enforcement of the vagrancy laws. The third mode of discourse, associated mainly with the cause of moral reform, advocated instrumental use of the criminal law to suppress prostitution once and for all and institutional structures to show prostitutes the error of their ways and to train them for respectability. Development of Prostitution Laws since 1892 The Criminal Code 0/1892: A Reflection of Competing Ideologies The Criminal Code of i89220 - described by Parker as having an extensive, if not exhaustive, set of provisions relating to the protection

29

Enforcing Canada's Prostitution Laws

of women and children in sexual matters21 - contained two main groupings of provisions on prostitution. It incorporated, first, a set of pre-existing vagrancy provisions relating to street-walking, keeping, being an inmate or frequenter of a common bawdy-house, and living on the avails of prostitution.22 These offences drew the relatively mild penalties of a maximum fine of $50 or six months' imprisonment, or both, and focused on the putatively disorderly or dissolute character of the conduct involved. In tune with the view that institutionalized prostitution was in relative terms the most culpable and potentially disruptive form of the trade, keeping a common bawdy-house also became the subject of a new indictable nuisance offence which carried a maximum penalty of one year's imprisonment.23 The vagrancy offences combined censure of a status, that is, membership in an inherently deviant class or group, and of noisome behaviour. The ascription of prostitution to female depravity was predictably reflected in a degree of sexual discrimination within the substance of the vagrancy laws. Although in the bawdy-house offences, male and female keepers and users were, in theory at least, both at risk from the law, in streetwalking, the offence was exclusively a female one; the customer was free of legal reproach. In this instance the status quality of the offence was pre-eminent. The second set of provisions was directed primarily not at nuisance or status but at the evil of the exploitation of prostitution. Its inclusion was directly attributable to pressure from social reformers. Women under twenty-one who were not 'common prostitutes' or of 'known immoral character' were protected from procuring for the purposes of 'unlawful carnal connection' within or outside Canada.24 It was an offence to inveigle or entice any woman or girl into a house of ill-fame or assignation, as it was to procure or attempt to procure any woman or girl to become a common prostitute in Canada or abroad.25 Women and girls were protected from procurement to or from Canada for service in brothels and from unlawful carnal connection procured by threat, intimidation, fraud, or the application of 'any drug, intoxicating liquor, matter or thing. '26 All these offences were indictable and subject to up to two years' imprisonment with hard labour. Despite the clear emphasis on exploitation, even the procuring provisions reflected the low esteem accorded to 'fallen' women in the partial exclusion from their protective reach of 'common prostitutes' and girls or women of 'known immoral

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Securing Compliance

character.' In the revised law the so-called double standard was still evident. Related to these exploitative prostitution offences was a group of more general provisions, again inspired by the moral reformers, affording girls and women protection from sexual predators.27 A Discourse of Tolerance We have already noted the practice of tolerance of prostitution in some Canadian communities prior to i892.28 This policy reflected pragmatic considerations, lack of policing resources, and widespread belief that the suppression of the trade was an impossible dream. This view proved to be durable. Prior to 1910 policing in Canada outside the major metropolises, such as Toronto and Montreal, was very much an amateur affair. Police chiefs, not to mention the rank and file, were entirely lacking in the way of formal, professional training. As James Gray has noted, the major attribute looked for in recruits to police forces was brawn, not brains, and certainly not a capacity for moral indignation.29 Moreover, especially in western Canada, city and town forces were diminutive. These small bands of untrained men were charged with the daunting task of keeping order in burgeoning, boisterous communities with highly transient populations.30 Pragmatic obstacles such as lack of manpower, as well as a sense that a policy of suppression was unlikely to succeed, induced chiefs of police to favour regulation of prostitution by confining it in 'red light,' or segregated districts. In this way, it was contended, the police would be better able to conduct surveillance and thus control it and in the process to prevent it dispersing into areas in which middle-class sensibilities were likely to be offended. The availability of prostitution was also seen as an important element in maintaining public order among the large groups of unattached males who passed through these communities. A tacit understanding, at least, existed between the police, brothelkeepers, and prostitutes: the law would not be enforced if they behaved themselves or, if it was, there would be minimum penalties.31 At the level of the constable on the beat, it would seem that class affinity and empathy with madams and prostitutes often meant the turning of a 'blind eye.'

31

Enforcing Canada's Prostitution Laws

It was only if more serious criminality than illicit sex were brought to their attention, or the heat from the moral entrepreneurs became too intense, that the police were moved to arrest and prosecute. As Nilsen shows in her study of prostitution in Vancouver during this era, the peak years for arrests, 1906, 1907, and 1912, match perfectly the high points of community campaigns favouring a 'get-tough' policy of criminal law enforcement against prostitution.32 Typically the police, even when goaded into action, would only move for fines, a way of indicating to madams and prostitutes that the practice of tacit toleration of brothels was not in jeopardy. That the police were tolerating prostitution is evident from several public inquiries launched during the first twenty years of the century, usually at the behest of local moral reformers dissatisfied at the police record in pursuing the 'social vice.' These investigations and the resulting exposes were given wide circulation by daily reports in the press.33 In Calgary the force and its relaxed chief, Tom English, were the subject of an inquiry early in 1908 by Mr Justice Charles Stuart. This was instigated by the local Moral Reform League, which charged that houses of ill-fame were operating openly under the noses of the chief and his officers. Although the judge concluded on technical grounds that the* charges were not substantiated, the circumstantial evidence was quite damning, suggesting a conscious policy of toleration.34 The spotlight shone on Winnipeg after the Rev. Dr John Shearer, general secretary of the Moral and Social Reform Council of Canada, was reported by the Toronto press late in 1910 as having thundered that that city 'has the rottenest conditions of things in regard to the question of social vice to be found in any city in Canada.'35 The upshot of the resulting recriminations between local moralists and city council was the establishment of a provincial royal commission under Mr Justice Hugh Amos Robson.36 On the evidence led before him, the commissioner found that the city's police commission had expressly instructed Chief MacRae to institute a policy of 'passive segregation' of houses of prostitution.37 The chief had accordingly arranged with the madams for them to move to Rachel and Macfarlane streets in Point Douglas, with an undertaking that they would be allowed to operate without interference, as long as the houses were run in an orderly manner. Although the Vancouver police force managed to avoid a public inquiry on its handling of vice problems until 1917, the police and the

32

Securing Compliance

Board of Police Commissioners came under mounting criticism between 1906 and 1912 for their policy of condoning a segregated area in the east end of the city.38 After six years of shifting the locale of the red light district from street to street in the face of vigorous opposition from both moral reformers and business and residents' groups, the board announced in 1913, in the light of an election campaign for the mayoralty in which the presence of the 'social vice' in the city was a major issue, that the latest segregated area on Alexander Street would be closed down.39 The police were supported and even encouraged in a policy of toleration by municipal politicians who shared their scepticism about the criminal law's ability to suppress prostitution and for whom economic imperatives and the scoring of political points were more important than moral reform.40 In Winnipeg, for instance, the Robson Commission found that the mayor, Sanford Evans, was, as a member of the Board of Police Commissioners, not only well aware of the attempt to set up a central 'red light' district, but also a supporter of the concept.41 That toleration of prostitution was not limited to the ranks of municipal politicians is evident from the controversy surrounding the refusal of BC Attorney General W.J. Bowser to find accommodation for fallen women sentenced to terms of imprisonment. Late in 1912 it was revealed that the provincial jail at New Westminster had been instructed by him not to receive any women ordered jailed for prostitution offences.42 This was at a time when the Vancouver police were beginning to crack down on the brothels on Alexander Street in the east end. It was reported in the press that, when challenged on this policy, Bowser made it clear that he did not favour imprisoning fallen women, an expedient which, he felt, was calculated to make their situation worse rather than better. Despite criticism from the city administration and outrage on the part of local moral reformers, Bowser seems to have remained adamant and unshakeable in his position. Judges and magistrates who served in frontier or 'open' communities were often sympathetic to the difficulties faced by the police in enforcing prostitution law and the impulse to tolerate the sex trade. Indeed, police magistrates, who were often members of local police commissions, were directly involved in formulating policies to facilitate police control of prostitution with a minimum of intervention. Police Magistrate William Palling of Fort William was especially forthright in

33

Enforcing Canada's Prostitution Laws

his views. Sensible opinion, he maintained in a letter to Ontario's deputy attorney general, favoured toleration.43 Prostitution off the street was essential, in his opinion, if respectable women were to be safe from the rough men from the lake vessels and railway crews who congregated in the town. The complainants he dismissed as a 'few fanatics.'44 The police magistrate of Winnipeg from 1904 to 1912, E. Mayne Daly, KC, also doubted the wisdom of a policy of suppression.45 As a member of the city's Board of Police Commissioners he gave testimony before the Robson Commission.46 He admitted that the action of the commission in April 1909, in revoking a previous decision to crack down on the brothels, was prompted by a desire to achieve a regime of passive segregation in the city. Unlike Palling, Daly's primary motivation was not acceptance of prostitution as a social necessity but rather concern that attempts at suppression had merely spread the problem geographically and, in turn, produced greater social ills than those that could be anticipated with a policy of toleration in a well-defined red light district. He had been appalled in particular by the apparent spread of venereal disease in the city and, as judge of the juvenile court, by the increasing number of young girls involved with the brothels who came before him. Like Palling he was ill-disposed toward the local reformers, who, he suggested, were long on talk but ignorant of both the practical and legal realities of dealing with vice.47 The Moralists' Discourse Despite the impressive array of provisions in the Criminal Code and reformers' assumption that the provisions were being enforced, the reality was otherwise in many Canadian communities. In these towns and cities tolerance was being practised, even if not being preached. It was only a matter of time, however, before the representatives of reform thinking became all too aware of the gulf between the theory of the law and its practice. The fears associated with moral decline and the weakening of the family already noted were accentuated greatly toward the end of the nineteenth century and during the first twenty years of this century. The darker sides of both industrialization and urbanization, which must have been a vicarious experience for most Canadians of an earlier era, were now part of domestic experience.48 To them was ascribed a general

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Securing Compliance

decline in moral values and the emergence or aggravation of a series of social problems, including drunkenness, gambling, the use of narcotics, salacious forms of entertainment, marital infidelity and breakdown, child abuse and neglect, and a range of sexual perversions, including prostitution. Among the alarming offshoots of the reorientation of work and life-styles that attended the growth of the cities and wage labour were the entry of working-class women, including wives and mothers, into the work-force and the detachment of young women from their families as they pursued jobs in distant communities. This fear was internalized to a degree because some female members of the middle class were beginning to take up employment and to show a degree of social and fiscal independence, at least before marriage.49 The discomfort created by greater economic and social mobility was heightened by the influx of new immigrants into the country from the mid-18908. Unlike earlier waves of immigration, many of these people, especially those from southern and eastern Europe and beyond, lacked a Protestant, Anglo-Saxon frame of reference and thus, it was thought, the moral values of the dominant community.50 The tendency was to characterize the newcomers collectively as crude, uncivilized, illeducated, and immoral. Even some of the British immigrants of the era, especially 'wayward girls,' were seen as of a distinctly inferior breed. If the immigrants came from visible minorities - the Chinese, Japanese, black, or East Indian communities - there were many Canadians who saw them as basically sub-human.51 Whatever the origin of these newcomers, they were perceived as a threat to the shared common values of Canadian society. Those Canadians who were deemed in need of protection, that is, women and children, were seen as at particular risk from their largely imagined wiles. A major area of concern to the reformers was sexual aberration. Prostitution, in particular, was singled out as the most dangerous form of sexual excess. Not only did it subvert the sanctity of the family, but it was also increasingly associated in the public mind with the spread of venereal disease. The latter was often seen as having reached epidemic proportions, threatening not only those who were culpable in indulging in illicit sex but also the innocent - the wives and children to whom it was ultimately transmitted.52 These fears often translated into apprehension about racial degeneration, if not suicide. Although the apparent decline in the moral values of the community

35

Enforcing Canada's Prostitution Laws

and the alleged growth in prostitution and the incidence of venereal disease generated these pessimistic thoughts, they were not seen as an excuse for inaction. A strong social reform movement emerged, representing a coalition of groups, at a national as well as at a local and regional level, which were committed to improving both the moral health and the social harmony of the nation. The movement had its roots firmly embedded in mainline, evangelical, Protestant Christianity, which claimed that, with the right sort of social analysis and the enthusiastic application of will, it was possible to build 'a new Jerusalem' here on earth in which strong moral values would hold sway and in which the conditions in which vice flourished would 'wither away.'53 In this quest the social gospel movement, inspired especially by the Methodists and the Presbyterians, was allied with womens' organizations, in particular the Womens Christian Temperance Union, the National Council of Women, and the Young Women's Christian Association, which were calling for a greater voice for women in influencing, if not actually crafting, social policy,54 as well as with business and community interests which considered themselves the day-to-day victims of unbridled vice. The timing of the campaign for moral renewal was propitious, as it came in the middle of a period in which federal and provincial governments were becoming ever more involved in the formulation and application of social policy. The reform movement was to play a significant role in both encouraging and mediating this evolution from the private to public ordering of the social welfare.55 From 1904, when the National Council of Women undertook to investigate how Canadian law relating to prostitution was being enforced and discovered the reality of tolerance, reformers began to decry the immorality which they saw as rampant in many Canadian communities. The battle against white slavery and the discourse that supported it took place at several levels.56 By their public utterances and in particular by an appeal to the inherently slippery term white slavery, reformers created a highly emotional climate of public opinion in which prostitution became an object of increasing abhorrence and fear. In this they were assisted by the growth of a parallel concern in the United States and the remarkable growth of a popular anti-white slavery literature in that country.57 The latter incorporated sensationalist and

36

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lurid accounts of maidenly virtue defiled typically by vicious alien profiteers, 'sound' moral precept, and highly selective and carefully pruned scientific, medical, and statistical data about the dangers of both prostitution and venereal disease.58 The Canadian reformers adopted much of the American rhetoric and drew the conclusion that the source of Canadian problems lay in the operation of sinister syndicates operating from south of the border.59 The message in all of this was clear: respectable Canadian womanhood was at risk from the machinations of a conspiracy of non-Anglo-Saxon white slavers, organized from outside the country, who had no respect whatever for Canadian institutions and values. Complementing this intense moralism was a well-organized campaign of lobbying in which the reformers pressed for implementation of a package of amendments to the Criminal Code. Instrumental in pushing for these changes were the Moral and Social Reform Council, and its alter ego, the National Committee for the Suppression of the White Slave Trade, which was established in 1912.6o In accord with the view of the reformers that sex within marriage for the purposes of procreation represented the limit of legitimacy, the reform proposals called for new code provisions outlawing adultery, or 'lewd cohabitation' as it was emotively described, as well as a package designed to extend the ambit and strength of the bawdy-house and procuring provisions in the code.61 A Dissenting Voice: Radical Feminism In the midst of this moralizing there were voices of dissent, or of scepticism at least. There was, in particular, a small group of feminists, predominantly single or independent women, adherents to socialist principles, who were prepared to interpret more radically the phenomenon of prostitution. Its leader was Flora MacDonald Denison. Denison was an ardent socialist and spiritualist who had experienced an unhappy marriage, ran a successful small business, and committed herself to a life of social activism with true economic, social, and sexual equality as its aims.62 For Denison and those who shared her views, prostitution was a reflection not of moral or mental delinquency but of a fundamental and discriminatory power structure operating at the point where class and gender intersect, which made women both economically and socially subservient to men. For these activists, prostitution was only

37

Enforcing Canada's Prostitution Laws

one example of that power imbalance which affected and conditioned male / female relations generally, not least in marriage. By this view, all dependent women were victims.63 Radical feminists, given their location of the roots of prostitution in patriarchy, were averse to the use of the criminal law to punish prostitutes 64 and strongly committed to fundamental changes in the socio-economic system which would improve the lot of women economically and, in the process, remove the power imbalance that characterized gender relations.65 The radical feminists' notion that all dependent women, especially prostitutes, were victims of a patriarchal system that manipulated both class and gender differences was part of a discourse that was effectively sidelined or ignored during the period 1892-1920, because it lay well outside the mainstream of reformist opinion. Associated as it was with 'independent' women, it created general anxiety, if not hostility, among all those who felt that these women 'did not know their place' and that their credo was potentially ruinous of 'family life.'66 Although there is almost no surviving record of the attitudes of prostitutes themselves,6"7 police records suggest strongly that - as the radical feminists claimed - the major reason for their involvement was economic and social deprivation. Table 2, below, sets out the recorded occupations for persons charged with keeping bawdy-houses in Vancouver and Calgary between 1912 and 1917 and 1913 and 1920, respectively. The jobs listed fall predominantly into domestic service and sales. Figures cited by Toronto's Social Service Commission (the city's vice commission) included the further category of factory work.68 These were virtually the sole areas of employment to which most working-class women of that era had access. Working conditions were generally bad and the wages pitifully low in those occupations.69 For women who had to support themselves and families with starvation wages, prostitution seemed to promise a way out, and for some at least its practice as a survival strategy constituted a conscious act of resistance to the deplorable social and economic conditions in which they were forced to live. That its practitioners were subject to illness, danger, and general mistreatment does not seem to have detracted from its character as a mode of resistance. Although usually thought of as the silent victims, prostitutes manifested resistance to the policy of social ostracism and legal repression, which was played out in their actions rather than in their words.70

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The Legislative Impact of the Social Purity Movement Raising the emotional tone of the debate on white slavery and formulating a concrete set of law reform proposals helped lead to the passage and substance of the Criminal Code Amendment Act of 1913.71 This government measure, which had the strong support of the prime minister, Sir Robert Borden,72 eschewed the more extreme proposals of the reformers on sexual deviance but incorporated practically all their demands on exploitation and bawdy-houses.73 The act expanded the bawdy-house provisions by presuming a person who appeared to be a master or mistress of such an establishment to be one and by including three new offences; the first prohibited the owner of premises from permitting others to use them as a bawdy-house, the second treated the landlord as a keeper if he or she failed to eject a tenant convicted of running a common bawdy-house on the leased premises.74 The offence of permitting was visited with a maximum penalty of $200 or two months' imprisonment or both. Both changes reflected a growing desire to treat the operators of brothels and houses of assignation as exploiters of prostitution. A third new offence, that of being a 'found in,' replaced the former vagrancy offence of 'frequenting' and drew a fine of not more than $100, or a prison term of up to two months, or both.75 The purpose of the change seems to have been to provide a catch-all offence, not tied to the notion of habitual use which had grown up around the frequenting offence, which would allow the police to scoop up and deal with all those present in bawdy-houses during raids. A presumption that premises were a disorderly house was also established by the wilful prevention or obstruction of a peace officer from entering.76 In 1915 the bawdy-house provisions were further strengthened. The option of proceeding against keepers either under the indictable nuisance offence or as vagrancy was, with the repeal of the vagrancy offence of keeping, removed.77 At the same time, the summary, vagrancy offence of being an inmate of a common bawdy-house was replaced by a new indictable offence which was subject to a maximum penalty of $ioo.?8 The object of this change was to increase the legal pressure on the prostitutes, especially those using brothels and houses of assignation, presumably with a view to deterring them. The 1915 act also provided that in the case of both keeping and being an inmate of a

39

Enforcing Canada's Prostitution Laws

bawdy-house, a person convicted three or more times of these offences was subject on subsequent conviction to a prison term of a minimum of three months and a maximum of two years.79 In 1907 the definition of 'keeping a common bawdy house' had been extended to catch individual prostitutes working out of their residences or rooms.8o In 1917 the definition was further revised to extend its reach to cover the 'practice of acts of indecency'81 as a response to the appearance of massage parlours as locations for sexual diversion.82 Cumulatively, then, these changes were aimed at widening the net to catch a greater range of exploiters, as well as at giving the police greater power to interfere with both the demand for and the supply of sexual services for reward. The desire to attack the exploitation of prostitution more resolutely was also apparent in amendments to the code on pimping. In 1913 a new indictable offence of living wholly or in part on the avails of prostitution was added to the procuring section, replacing the former vagrancy offence of 'living on the avails. '83 It was supported by a presumption of guilt where the accused lived with or was habitually in the company of prostitutes with no visible means of support. The procuring provisions themselves were revised that same year. The upper limit of twenty-one years for victims of the general procuring offence was removed so that all women would be afforded its protection. At the same time prostitutes were excluded from the protection of the provision proscribing inveigling.84 Moreover, there were added the new offences of concealment in a bawdy-house, spiriting a new arrival to Canada to a bawdy-house, and exercising control, direction, or influence over a female for purposes of prostitution. Procuring became an offence subject to arrest without warrant.85 Indications of the abhorrence with which pimps and procurers were now viewed are evident in the setting of the maximum penalty at five years' imprisonment in I909,86 and the addition in 1913 of whipping as a discretionary penalty for procuring in the case of a second or subsequent offence.87 The maximum penalty for procuring was further increased in 1920 to ten years.88 The inclusion of a significant segment of the reform package in the Criminal Code was clearly treated as a victory by the reformers. Almost overnight the attention of the groups, such as the National Council of Women, shifted away from concern to secure more repressive legisla-

40

Securing Compliance

tion to the more positive expedients of education of the young, the reform of deviant individuals, and the greater institutional involvement of women in those processes.89 The Rev. Dr Shearer, by this time general secretary of the National Committee, was convinced that the law was being enforced purposefully. In his 1918 report to the Social Service Council he exuded confidence: 'From information at hand it would appear that the legislation secured in 1913 had been successful in the prevention of "procuring" girls for vice purposes. Correspondence with the authorities in the cities of Canada indicates that very few cases of this kind occurred within the Dominion. The faithful work of the police in our Canadian cities, together with the excellent law has done much to prevent the continuance of this crime. '9° The criminal statistics for the period 1913-20 certainly support the reformers' view that the police were now serious about enforcing the law (Figures 1-5, below). The convictions for bawdy-house offences doubled between 1910 and 1915, from 2,814 to 5,469. Those for procuring, so insignificant that they were not separately reported before 1910, had quadrupled by 1916, from 16 to 66.9I To a limited degree the reformers established a direct stake in the enforcement of the reformed law. Access to the process was achieved through the appointment of the first female magistrates. Emily Murphy, the first of these, was appointed by the government of Alberta in 1916 to serve in Edmonton.92 She was followed soon after by Alice Jamieson, in Calgary, and Helen McGill, appointed the first juvenile court judge in Vancouver by the BC government.93 These women, who were active i feminist causes, brought with them a different set of beliefs and values to the role of magistrate than their male counterparts. They were critical of the insensitive way in which the male-controlled and -operated system treated female offenders, especially juveniles, and its lack of resolution in pursuing male sexual exploiters.94 They were also concerned to get at the roots of the personal and social problems of the offenders who appeared before them. Emily Murphy, for example, had some appreciation of the economic and social context of female delinquency, including prostitution, and saw her role as that of the social engineer assisting the accused to a better, more responsible life.95 Although all these women could be tough-minded when it came to dealing with adult prostitutes who, they felt, were unwilling to take

41

Enforcing Canada's Prostitution Laws

responsibility for their actions, neglected their families, or were incorrigible,96 they showed understanding toward the young and naive and often took steps to assist them with job placement and shelter.97 Murphy even took pains to follow up on those whom she sentenced.98 It was largely through the efforts of these women that some of the ideals of the reformers were translated into action, in particular, the strong impulse among some female reformers to individualize justice in the inferior courts. Their small numbers, however, limited their impact. Although superior court judges during the period 1892-1920 could not be said to have espoused the philosophy of reformers, some were ready to apply the revised law in a purposeful manner. Of these there were individuals who took a strong moralistic view of the practice of prostitution. Such a judge was Henri-Thomas Taschereau, subsequently chief justice of Quebec, who, in 1905, investigated the handling of prostitution by the Montreal police. In a report of high moral tenor he castigated the force for its lack of resolve in pursuing the practitioners of the vice.99 There were others who empathized philosophically with the reform movement. Mr Justice Frank Hodgins of the Ontario Court of Appeal conducted two royal commissions into venereal disease and 'feeblemindedness' respectively between 1918 and 1920.10° His views, as expressed in those documents, epitomize instrumentalist reformist opinion on the two issues. In court he was also prone to taking a firm position against prostitution, especially where exploiters were involved. In R. v. Quinn,101 in 1918, Hodgins's brethren gave a narrow interpretation of the wording of the offence of procuring in section 2i6(i)(a) of the code, which proscribed procuring or soliciting 'any woman or girl to have lawful carnal connection ... with any other person or persons.' The majority found that a taxi driver who used his vehicle to drive prostitutes and customers to a place where sexual services were rendered was not guilty of procuring under this clause, even though he introduced the prostitutes to the men and received a reward from the former for providing the introductions. Hodgins in his dissent argued that, given the important role of this accused in bringing together the partners, he could not be considered 'a mere passive link in the chain' and treated as a cab driver who incidentally transported parties to a place of prostitution.102

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Figure i Bawdy-house offences in Canada, 1898-1921

Some of those who interpreted and applied the law evinced a level of commitment to the policies underlying the reformist amendments to the code. The same could not be said of the law enforcers. The Public Order Discourse When the substance of the reformed criminal law on prostitution and the assumptions of the moral entrepreneurs that underlay it are compared with the actual pattern of enforcement of those laws, there is a very clear mismatch. Although the annual criminal statistics (Figures 1-5) indicate that the crusade against white slavery led to an increase in law enforcement activity against persons involved in prostitution and ostensibly the exploiters, local records in Calgary, Toronto, and Vancouver as to who was charged and convicted reveal that the primary focus of police attention was not the devious male profiteer, of oriental or eastern European origin, allied with sinister forces outside the country, but the prostitute. Moreover, even the exploiters who were actually caught by the law do not match the stereotype of the cunning fiend who figured so frequently in and-white slavery propaganda. Comparative analysis of police booking registers from Calgary and Toronto respectively from 1912 to 1920 and the prisoner record book for Vancouver, covering the period from October 1912 to November 1917, is revealing in this regard.103 Table i sets out the figures for persons

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Enforcing Canada's Prostitution Laws

Figure 2 Bawdy-house offences in Vancouver, 1898-1921 (includes BC mainland until 1902)

Figure 3 Bawdy-house offences in Calgary (includes surrounding area), 1898-1921

arrested and charged in the three cities for the exploitative offence of keeping a common bawdy-house. In each instance, although in significantly differing proportions, the number of women outranks that of men. In the case of Vancouver the ratio is ten to one; in Calgary four to one; and in Toronto two to one. When the detail of the records is examined more closely, especially for Vancouver and Calgary, it is clear that by no means all of the women

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Figure 4 Bawdy-house offences in Toronto (York County), 1898-1921

Figure 5 Procuring convictions in Canada, 1910-1921

charged were 'exploiters' (see Table 2). In Vancouver, of the 378 arrests for keeping, at least 96 (25.4 per cent) took place in rooming-house rooms, apartments, or hotel rooms. When the arrests for females for more than one offence - including at least one keeping charge - are analysed for the period, the picture for most of those women is of movement between establishments. Of 62 such women, only 16 had a constant address recorded for place of arrest, and several of those

TABLE 1 Arrests and charges, 1912-20 Toronto

Calgary Female

Male

Keeping a common bawdy-house Arrests 203(77.7%) 58(22.3%) Individuals charged 201(79.5%) 55(20.5%) Procuring Arrests Individuals charged

Vancouver

Total

Female

Male

Total

Female

Male

Total

261

455(67%)

224 (33%)

679

378(92.4%)

31(7.6%)

409

332 (92%)

29 (8%)

361

254

3(37.5%)

5(67.5%)

8

6(25%)

18(75%)

24

2 (20%)

8 (80%)

3 (37.5%)

5(67.5%)

8

6(25%)

18(75%)

24

2(27.2%)

7(77.8%)

9

Living on the avails Arrests 6 (20%) Individuals charged 6 (20%)

10

24 (80%)

30

13 (100%)

13

7(100%)

7

24 (80%)

30

13(100%)

13

7(100%)

7

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Securing Compliance

TABLE 2 Occupations of women charged with keeping common bawdy-houses, 1912-20 Vancouver

Calgary Domestic

Housekeepers Housewives / wives Domestic servants Miscellaneous TOTAL

Sales and service

74(63.2%) 32(27.4%) 8 (6.8%) 3 (2.6%) 117(65.7%)

Storekeepers Waitresses Dressmakers Hairdressers Stenographers Miscellaneous

17(27.9%) 16 (26.2%) 13(21.3%) 5(8.2%) 2(3.3%) 8(13.0%)

TOTAL

61 (34.3%)

Housekeepers Chamber / housemaids Housewives Roominghouse-keepers TOTAL

64 (61.5%) 19(18.3%) 12(11.5%) 9(8.7%) 104(65.5%)

Waitresses Dressmakers Launders Manicurists Hairdressers Cashiers Cooks Milliners Miscellaneous

14(25.5%) 12(21.8%) 5(9.1%) 4(7.3%) 4(7.3%) 3 (5.5%) 3 (5.5%) 2(3.7%) 8(14.5%)

TOTAL

55 (34.5%)

locations were rooms. Typical is the case of Maud Harless, an American whose occupation is recorded merely as 'prostitute' and whose racial origin was described as 'Creole.' Between 16 April 1913, and 28 October 1914, she was charged with keeping once, being an inmate on four occasions, and with an unspecified bawdy-house offence on another. She was arrested at different premises in each case. From this case and others, the impression emerges that the police were as much, if not more, interested in using the keeping offence against single prostitutes plying the streets for men to take back to their rooms than in catching persons operating institutionalized brothels.104 The Calgary records suggest that the institutionalized brothels were by comparison more numerous in that city than in Vancouver and thus more often a focus for police activity. However, there was also a sizeable group of women among those arrested operating on their own or

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Enforcing Canada's Prostitution Laws

with one partner out of homes or rented space, in part no doubt a reflection of the greater attention being paid by the police to established brothels. It is tempting to assume that the Toronto figures demonstrate that in that community the police were more serious about getting at the true sources of exploitation, but once again the records belie that confident assumption. The focus of police attention in that community was, it is true, with premises that were operated commercially as bawdy-houses. However, far from being palatial or substantial establishments, the vast majority were small houses of assignation at which it was possible for prostitutes and customers to conduct their liaisons in private. They were often run by couples, sometimes by a husband-andwife team, a phenomenon that helps to explain the higher incidence of males charged in that city. A not-untypical scenario was the arrest on 28 March 1916 of John arid Mary McCann, both of whom were charged with keeping a house of ill-fame. Two other individuals, one male, one female, who were caught on the premises were charged as found-ins. The McCanns were almost certainly operating a small house of assignation. Although they were in the business of aiding and abetting prostitution, it was a form of independent small business that was remote from the supposed international corporate web that features so heavily in reformist literature. Table i displays comparative figures for the three cities of arrests and charges for procuring and living on the avails. In contrast with the keeping numbers they are modest in the extreme. However, they do demonstrate that arrests for these offences were predominantly, if not exclusively, male. In Vancouver the number of arrests was significantly lower than those in the other two cities. In both Vancouver and Calgary the prior occupations of those arrested is given. Although that detail is absent from the Toronto figures, an analysis for the same period of the records of the Toronto Central Jail, where procurers and pimps as well as some male keepers were incarcerated, does provide that information.105 The pattern of jobs, and what it suggests about the socio-economic circumstances of these men, are common for the three communities. Almost to a man they had held down, or more likely moved between, marginal, unskilled, and semi-skilled pursuits. Among the jobs listed are those of janitor, labourer, barber, sawyer, waiter, junk dealer,

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TABLE 3 Charges for keeping a common bawdy-house, 1912-20 Calgary

Toronto

Vancouver

Arrests and charges Convictions (see Dispositions below) Withdrawn / discharge Bail forfeited Remand / warrant, etc

261 177 (67.8%)

679 503(74.1%)

409 240(58.7%)

56(21.5%) 12(4.6%) 16(6.1%)

68 (10.0%) 108(15.9%)

51 (12.5%) 116(28.4%) 2 (0.4%)

Dispositions Prison Fines Suspend sentence / caution

177 (100.0%) 55(31.1%) 111(62.7%)

503 (100.0%) 174 (34.6%) 328 (65.2%)

240(100.0%) 26(10.8%) 191 (79.6%)

11(6.2%)

1 (0.2%)

23 (9.6%)

teamster, fruit hawker, bootblack, miner, plumber, and longshoreman. The impression is one of a group of people lacking in education and life skills living a shiftless and marginal existence - a far cry from the clever exploiter of the reformers' demonology. It is true that some of the men charged as keepers are listed as rooming-house and hotel keepers, which may well suggest more in the way of commercial design. However, this group was in the minority, and almost certainly in several cases the men were merely agents for the more shadowy owners of the premises. The sense that those enforcing the law had a somewhat different agenda from the moral reformers is strengthened by the comparative figures for the disposition of those convicted of keeping a common bawdy-house in the three cities (Table 3). The ratio of persons fined to persons imprisoned again varies considerably between Vancouver on the one hand (8:1) and Calgary and Toronto (2:1) on the other. The figures overall suggest, however, that fining was the preferred penalty. This was so, even though until 1915 the crown could charge a person arrested for keeping with an indictable offence, which prescribed a maximum sentence of one year in jail, and that after 1915 keeping was exclusively an indictable offence. In the case of procuring and living on the avails, where convictions were secured all but a small minority received jail sentences (Table 4). These ranged from six months to a year in Vancouver, one month to two years in Calgary, and from three

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Enforcing Canada's Prostitution Laws

TABLE 4 Charges for procuring and living on the avails, 1912-20 Calgary

Toronto

Vancouver

24 7 (29.2%)

10 2 (20.0%)

5 (62.5%)

13(54.2%) 4(16.6%)

8 (80.0%)

3(100%)

7(100%)

2(100%)

30 17 (56.6%)

13 9(69.2%)

7 2(28.6%)

8 (26.6%) 1 (3.3%)

2(15.4%) 2(15.4%)

5(71.4%)

8(47.1%) 3(17.6%)

8 (88.9%) 1(11.1%)

2(100%)

PROCURING

Arrests and charges Convictions (see Dispositions below) Withdrawn / discharge Remanded Dispositions Prison Fines

8 3 (37.5%)

LIVING ON THE AVAILS

Individuals charged Convictions (see Dispositions below) Withdrawn / discharged Remanded Dispositions Prison Fines Suspended sentence / caution

6(35.3%)

months to two years in Toronto. The figures for procuring show a high proportion of charges either withdrawn or dismissed. In Vancouver in particular the chance of being convicted for either procuring or living on the avails was minimal. That suppression of prostitution was not the major impulse of members of the magistracy can be seen too in the sentencing record of individual judges. Particularly revealing in this regard is the pattern of sentences meted out by Col. George Denison, the Toronto police magistrate between 1877 and 1921.Io6 That long period of service makes it possible to track his performance with certain types of offender. Denison had no qualms about dealing resolutely with male procurers and pimps, as the figures above suggest. With charges under the bawdy-house laws he seems to have been much more restrained. As an

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TABLE 5 Sentencing by Col. George Denison for bawdy-house offences, 1895-1915

1895 1900 1905 1910 1914-15

Inmate (fine /jail)

Frequenter / found in (fine / jail)

Keeper (fine / jail)

6/6 24/11 28/10 20/7 9/1

3/6 29/8 17/2 32/7 157/19

7/3 21/26 25/16 46/18 26/22

examination of the booking registers for the four years 1895, 1900, 1905, and 1910 and a six-month period straddling 1914-15 shows, Denison was inclined to fine rather than to jail convicted offenders. Table 5 sets out the relative frequency of fines and imprisonment for the three offences of being an inmate, a frequenter (after 1913 a found-in), and a keeper of a common bawdy-house. Except for the year 1895, in which very modest figures were registered for all three offences, and for 1900, in the case of keeping a common bawdy-house, Denison clearly preferred the fine to imprisonment. The range of penalties exacted increased only modestly in severity over the period. In the case of the inmate offence for 1900, 1905, 1910, and 1914-15, the standard penalty was $10 plus costs or 30 days in jail in lieu of payment. For frequenting, $5 or 30 days was the norm. If the colonel was in a severe mood, he was inclined to substitute $10 for the lower figure. In the case of keeping there does seem to have been an increase in the fines, from $10 and costs in 1895, 1900, and 1905 to $20 in 1910 and $30 in 1914-15, but lower fines of $10 and $20 respectively were still being exacted by the colonel in the latest two periods.I0? What explains this apparent gulf between the aspiration of the reformers and legislators on the one hand and the police and the magistracy on the other? A plausible explanation is that the law enforcement authorities were guided by a different philosophy and more worldly and pragmatic considerations than those that stimulated the reformers. This is evident in its most principled form in the attitudes of several of the police magistrates of the era. Two in particular have attracted the attention of social historians - Denison of Toronto and Col.

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Enforcing Canada's Prostitution Laws

Gilbert Sanders of Calgary, who was appointed in 1912 and retired in 1932.Io8 These men were of similar background and shared many of the same views of society and their place within it. Both came from military or police backgrounds. They brought to the court-room the values and prejudices of late-nineteenth-century social conservatism. Crime was viewed by them not in terms of its social or economic roots or causes but merely as the behaviour naturally associated with the 'commoner' or working class. They were often highly judgmental when members of minority or ethnic groups came before them, and both were susceptible to the racial stereotyping and slurs that were openly espoused by those of their background and class during that era. Both men claimed to work by intuition and reacted against attempts to 'obfuscate' justice, as they saw it, by appeals to the letter of the law. They were also capable of meting out harsh penalties.109 On vice the attitude of both magistrates seems to have been equivocal. They certainly felt no compunction about sentencing the parade of prostitutes, brothel-keepers, inmates, procurers, and pimps who came before them. Moreover, in tune with their general attitude toward crime, they were not disposed to ask why the accused were in court. Within the leeway provided by the substance and process of the law they were ready to apply stiff penalties to known exploiters and consistent repeaters. They were, however, not particularly sympathetic to the views and tactics of the reformers. Neither appreciated the combination of zeal and instrumentalism that drove the social purists, and they were inclined to believe that reformist claims about white slavery were overblown. Denison, in particular, reacted against moral campaigns designed to induce conformity among the working class.110 Given their determinist and individualistic view of criminal and deviant conduct as a personal pathology, Denison and Sanders saw vice as the inevitable product of the inbred immorality of the lower classes. They would have concluded that this was a condition that was unlikely to change. All that could reasonably be done was to use the criminal law to control the problem and to keep it within manageable bounds. Only if the offender proved incorrigible and a persistent nuisance would they be moved to sterner expedients. Their close association with the policing process, through membership of police commissions, and their sympathy with the frustrations of the police in enforcing the prostitution laws served to underline this conservative approach.111

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The commitment of the police during this period to the discourse of public order can be attributed to some extent to the sort of principled position taken by men like Denison and Sanders. Undoubtedly there were other persons in authority, like Staff Insp. Archibald of the Toronto force, who, although of humbler background than the magistrates, were so committed to the concept of preserving order for the welfare of respectable society that they identified closely with or adopted the socially conservative values and fears of the middle class.112 There were also other, more pragmatic impulses at work among the police. Although sensitive to public concern about vice generally and prostitution in particular, especially when that concern was highly vocalized, they doubted the efficacy and advisability of a general policy of repression and were, of course, only too conscious of other demands on their scarce time and resources.113 On the value of a policy of suppression of prostitution, even the zealous Archibald expressed fears that it would merely relocate and diffuse the problem. On enforcement of the bawdy-house laws he reported in 1893: Houses of this class are not numerous, nor are they the abode of many professional prostitutes. While the police have nothing to do with the ethical phase of the 'social evil' question, their duty being merely to apply the law as they find it, it should be borne in mind that a policy of repression in too severe a form may lower rather than improve the moral tone of the people, by causing women of the town to seek the shelter of private lodgings in respectable localities instead of confining themselves to places where their presence is not objected to.114

Although the reports of the staff inspector in charge of morality for the period from 1892 to 1920 are marked by self-serving observations on how vigorously the police had enforced the law, this anxiety about displacement resurfaces from time to time. * I5 The impression left is that the Toronto police were ready to enforce the law at a level and with an intensity that would demonstrate to the public that they were active in the cause and to a degree that would show the practitioners of prostitution that they, the police, were in control and ready, if the need arose, to move swiftly and purposefully against conduct that threatened bourgeois and public interests more directly. While committed to

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creating an environment in which their attempt to maintain public order could be vindicated - symbolically by the exaction of low-order penalties in most cases, but vigorously and repressively where, on their own assessment, public order was threatened or where the community or its leaders demanded decisive action - they were not ultimately committed to suppressing the trade. The public rhetoric emanating from senior police officials was designed to shroud the compromise of moral values and institutional imperatives that this policy embodied."6 That the police saw their role primarily as preservation of order and not suppression of prostitution is evident from the pointed criticism levelled against the Toronto police in the 1915 Report of the Social Survey Commission.117 The presence of significant numbers of streetwalkers in public places and the apparent unresponsiveness of the police to complaints about prostitution and the activities of disorderly houses in immigrant areas of the city suggested to the commission that the police were less than resolute in enforcement. The commission also found evidence that the police dealt with a large number of cases informally without bringing them to court. For each of the years from 1911 to 1913 the annual figures for offences dealt with were significantly in excess of the returns for the city police court, which commission members interpreted as a clear policy of diversion. Nilsen's reconstruction of the vice crusades in Vancouver reveals a similar reticence of the local police and Board of Police Commissioners to follow the demands of reformers desiring suppression of the prostitution trade.118 The concern of the police to use the law to preserve order also explains, in part, the fact that, as the local records show, it was prostitutes who fell afoul of the law as much as, if not more than, exploiters. For the police, the women were the most visible aspect of the trade and, given the law, the easiest to collect evidence and secure convictions against. In the case of street-walkers, actual or suspected status was enough to arrest the women as vagrants. If the police wanted to be tougher on street operators who subsequently conducted their liaisons in apartments or rooms, they could and did achieve this by using decoys and securing convictions for 'keeping.'"9 The latter expedient would often also net colleagues of the woman and male frequenters or found-ins. The result was greater pressure on the women and an increased volume of convictions under the exploitation rubric. This pattern of enforcement made it possible to claim, as the chief constable

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of Vancouver did in 1913, that 'this Department has been very active in its efforts to keep down the Social Evil in the City; during the year 336 arrests being made of women of immoral character.' I2° Compared with the modest figures of previous years, when toleration was practised in the city,121 these figures were indeed impressive and no doubt satisfied the public that the force was on the move against vice. By contrast, it was, according to the police at least, more difficult to secure convictions against exploiters. With pimps, success depended on the testimony of prostitutes, who often refused to talk out of a combination of fear and loyalty. Procurers were, it seems, difficult to catch, because of difficulty in establishing a nefarious purpose on their part. Attempts to secure convictions against owners and landlords of premises used as brothels also foundered on evidential problems. Furthermore, these people were able to hire capable lawyers to fight their cases. There is no doubt that the police showed some resistance to pursuing exploiters, especially when the cost seemed likely to far outweigh the benefit. However, it is also clear that, in common with most of the magistrates, they did not accept the reformers' view of the world of sexual vice. By and large their experience was that the exploitation of prostitution was not being engineered and manipulated by sinister foreign syndicates but by individuals who were not far removed in origin, background, and status from the prostitutes. Occasionally this view was vented publicly, as in 1913, when the newly appointed president of the Association of Canadian Police Chiefs challenged the reformers to show him a proven case of white slavery.122 The discourse, then, that most often found favour with the police was that of public order. Although sensitive to reformers' concerns at the level of public relations, their operating strategy was one of containment and control, through a combination of both symbolic and substantive repression. This policy was in tune with their assessment of both what was needed and what would work, given the social and economic realities of policing, and was supported by the empathy shown to them by the magistracy. Prostitution and Individual Rights Neither proponents of social purity nor advocates of public order evinced any great concern about protection of the legal rights of people

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arrested and charged with prostitution-related offences. Indeed, it seems to have been a matter of indifference that prostitutes in particular could be picked up virtually at will, entrapped, and generally harassed by the forces of law and order. However, some Canadians did argue that those involved in prostitution were entitled to the legal rights accorded by the common law to citizens in general and accused persons in particular. The two major centres of resistance were criminal lawyers and judges in the superior courts. Lawyers who took criminal defence work were not committed to civil liberties in a political sense, as some of their modern counterparts are. For them the defence of the accused appears to have been simply an essential element in a system of criminal justice which placed the burden of proving guilt squarely on the state and afforded a series of major protections to the individual in the dock. Defence counsel made sure that the prosecution was put to the proof of its assertions and, within the bounds of legality, availed himself of any and all opportunities to use the protections of the law to assist his client. He was not expected to, and rarely did, identify with the interests and beliefs of his client. Nor would he necessarily have harboured any more abstract and philosophical commitment to the cause of individual rights. Prostitutes and even exploiters featured among the individuals who merited the services of defence counsel. The vast majority of prosecutions for prostitution-related offences, most of which were against the prostitutes, never got further than magistrate's court and were disposed of without the involvement of defence counsel. Where fines were meted out, the tendency of the persons convicted was to live with the consequences. In the case of jail terms, many offenders lacked the resources to contemplate launching an appeal. Some, however, did or were otherwise able to persuade lawyers to take their appeals. These cases provided the forums in which criminal defence lawyers were able to articulate a concern for the 'legal rights' of the individuals convicted.123 Although criminal lawyers seeking to protect those accused of prostitution-related offences revealed little understanding of the socioeconomic roots of prostitution - and no doubt some were driven more by the desire for mercenary gain that by altruism - they represented one of the few groups that admitted that these people had any rights at all. Moreover, they played a crucial role in bringing rights issues before the superior courts.124

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High court judges were generally committed to the view that strict adherence to procedural propriety and the rules of evidence was essential if the criminal law were to be administered fairly. Indeed, so deeply ingrained was this view that it often took precedence over other impulses that judges might feel. Mr Justice Dugas of the Yukon Territorial Court, for example, who had a major hand in drafting and sponsoring legislation outlawing the serving of liquor and the presence of prostitutes in the territory's dance halls, refused to sustain the conviction of two operators because the police had not proved to his satisfaction that the accused knew of the presence of the women in question.125 The establishments seem, in fact, to have been notorious haunts of prostitutes. With several judges, this policy of caution reflected more direct concern about police strategy in enforcing prostitution laws. Unlike magistrates, superior court judges were by and large sufficiently removed from police operations that they lacked a natural affinity with police concerns and frustrations. They were, therefore, prone to being quite critical of police practices, especially if the latter were seen as overbearing, deceitful, or capricious. Several courts showed themselves as unimpressed with the police practice of charging prostitutes working alone out of houses or rooms as keepers of common bawdy-houses.126 Particularly odious to certain superior court judges was the practice of using undercover agents or decoys to compromise prostitutes working the streets so that they could be charged with the more serious offence of keeping. The prostitutes who used the streets to pick up customers often took the latter to their residences or rented rooms. The undercover agent or decoy would accompany the woman and, after reaching the premises and proffering money, would arrest her and charge her with keeping.I2? Mr Justice Gait of the Manitoba Court of Queen's Bench described this as 'a disreputable practice.'128 Mr Justice Beck of the Alberta Supreme Court, who had castigated the Calgary force for use of this type of stratagem, remarked caustically, 'My former criticism has evidently had no influence upon the Calgary police, who continue the hypocritical and pharisaical pretense of being zealous in extirpating public vice by the secret adoption of the same vices.'129 Judges would also on occasion express concern at the possibility of people being convicted by the evidence of vindictive or unscrupulous persons.130 These characterizations were broad enough to include

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over-zealous moral reformers. Mr Justice Charles Stuart, in his investigation of alleged police complicity in the toleration of brothels in Calgary, criticized the local Moral Reform League, the members of which, he felt, were too ready to level unsubstantiated charges.131 Judges, such as Beck and Stuart of Alberta., were not motivated by a merely technical view of rights. The source of their concern was a strong, ideological belief in the supremacy of the common law and the independence of the judiciary as a bulwark against the abrogation or limitation of individual rights.I32 The common law was a shield against intrusive state action, especially action that stemmed from illconsidered responses to excessive moral fervour, or manifested itself in capricious and arbitrary law enforcement. Whether the accused was a prostitute, a suspected enemy sympathizer, or an alleged bootlegger, he or she was entitled to the full range of protections prescribed by the common law.133 There was, then, among the superior court judges a strain of rights consciousness. For some no doubt it was the traditional, rather conservative conception that we have observed among criminal defence lawyers of the time; for others it represented a genuine commitment to a more liberal philosophy of rights. While, even on this latter view, there was no attempt to understand prostitutes or their problems, they were recognized as having the same rights to a fair trial and treatment as every other citizen. Again, apart from the criminal lawyers, there were precious few people in Canadian society at that time who were willing to accept such a view. The Public Health Discourse In the first twenty years of this century a new form of discourse relating to prostitution developed, propelled in the main by public health professionals. The campaign for regulatory control of prostitution to which this movement gave rise stemmed from two basic concerns. First, there was acute anxiety among the public health community about the adverse medical and social effects of venereal disease. The development by 1910 within public health medicine of a specialty in sexually transmitted diseases, and of a greater understanding by its practitioners of the aetiology and epidemiology of venereal disease, coupled with an apparent exponential growth in the incidence of prostitution, led to a

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revival and accentuation of earlier concerns that had been used to justify enactment of contagious disease legislation in Britain and Canada in the i86os.134 Second, some psychiatrists located the cause of much criminality and immorality in mental deficiency, or 'feebleness of the mind,' as it was more often described. In the discourse that emerged, the two elements were combined in a compelling, 'scientific' argument for vigorous action by the state against prostitution and its practitioners.135 Because of its expert, scientific, and supposedly objective character, the discourse attracted enthusiastic support from both legislators and reformers, who were inclined to attach complete infallibility to its proponents. Until 1909 there was no known cure for venereal disease. While various panaceas had been advocated and tried, the most common involving the painful and potentially dangerous administration of mercury for gonorrhoea, the major objective of public health experts, had been to warn the populace of its dangers and of the need to practise sexual continence and to prevent its spread, by means of physical restraint if necessary.I36 The development of a conscious and openly instrumental public health approach to prostitution in Canada had to await a congenial political and social climate. The latter developed after 1900. A major stimulus was the growth of a vigorous public health discourse on venereal disease in the United States, which drew widely on the advanced research findings of continental European medical scientists. The campaign against white slavery in the United States during the 'Progressive Era' was marked by an appeal to scientific and statistical data by its champions.137 Eminent social scientists were retained to assist with the collection of data and its subsequent analysis in major investigations of the 'social vice,' especially those conducted by the various vice commissions.I38 Medical data were also collected through the efforts of organizations such as the American Society of Sanitary and Moral Prophylaxis (ASSMP) and the American Federation for Sex Hygiene (AFSH), which were established in part to investigate the link between prostitution and venereal disease.139 The collection and interpretation of data by public health experts were by no means devoid of moral colouring. Dr Prince Morrow, who founded both the ASSMP and the AFSH, was dedicated to investigating the connection between prostitution and venereal disease. It was his

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considered opinion that the cure for venereal disease was sexual continence. This conclusion was not, however, the result solely of clinical appraisal. Although Morrow saw continence as conducive to a man's health, he also believed that it was desirable to remove the temptation to immorality. Because of this, he tended to give the most favourable and incautious interpretation to data that supported the cause.I4° As a result, the subordination of a spirit of scientific inquiry to the politics of reform prevented any common understanding of the actual public health problems associated with prostitution. The aetiological and epidemiological import of the findings of both European and American public health experts about prostitution and venereal disease was translated to their Canadian counterparts through a burgeoning literature on the topic in medical and public health journals.I4J The data and their interpretation put out by the American public health establishment were also accepted into the moral discourse of Canadians, through the popular anti-white slavery tracts published in the United States.142 These included bowdlerized and often inaccurate reprints of the scientific findings and statistics.143 Many late-nineteenth-century reformers were ready to attribute prostitution at least secondarily to moral or mental weakness of character. The notion that prostitutes were mentally subnormal achieved greater credibility with the growth of the mental hygiene movement in Canada in the 19008 and IQIOS. The movement had its roots in hereditarian notions of the genetic transmission of moral, intellectual, and mental as well as physical characteristics, theories that Sutherland has described as 'an amalgam of humanitarianism, patriotism, science and pseudo-science.'I44 The movement sought to prevent the dilution of blood and genes of the race by those of inferior breeding.I45 While not all its adherents were convinced eugenicists, eugenic panaceas were often vaunted as the solution to 'racial deterioration.' The cause of mental hygiene brought together not only representatives of womens' groups, churches, and the amateur social work profession but also psychiatrists, who lent it considerable scientific credence. A major advocate of the movement was Dr C.K. Clarke, dean of medicine at the University of Toronto, one of Canada's most distinguished psychiatrists. He was responsible for amalgamation of various mental hygiene and eugenics groups into the Canadian National Committee for Mental Hygiene in I9i8.146 On the agenda of the

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committee was a series of priorities for state intervention to arrest genetic decline. That the entry of women and girls into prostitution, and in turn venereal disease, were attributable to feeble-mindedness was a conclusion that allowed for no doubt in Clarke's mind: 'To the psychiatrist it is plain that the sin [of infection and reinfection] is to be laid at the doors of a system which fails to make proper provision for the detection of the multitudes of mental weaklings who drift into prostitution, just as surely as a chip floating down a rapid stream must inevitably go over the rapids which await it.'147 Clarke was willing to concede that environmental conditions were conducive to these problems, although he was quick to associate the bad environment with the poor mentality of the parents of feeble-minded offspring.148 The solution was to control and treat the defective, deranged, and diseased at the earliest possible moment. Like the apostles of the public health movement, even the professional mental hygienists were unable to see the world without a moral prism, in this case, one through which all eccentric or anti-social behaviour was attributable to inbred mental and moral inferiority.149 The two strains of concern about the dangers inherent in venereal disease came together during the Great War, in conditions that were seen by the reformers as an emergency that threatened the nation's security. As Buckland and Dicken McGinnis have observed, 'By 1916 the military factor enabled reformers to remove the shroud from social diseases. Canadians became aware of the high incidence of venereal disease among recruits and of the rising rate of venereal disease among those already in the armed forces.' I5° The reaction to this troubling news included draconian steps. In 1917 the federal government invoked its special wartime executive decree power to allow for the long-term removal of 'loose women' from the vicinity of military establishments .I51 Although the steps taken to protect the military were dramatic, they were related to transitory conditions. More significant was the use of an emergency situation as the excuse for an effective lobbying campaign directed toward federal and provincial governments to prevent and contain venereal disease.152 Among the inspirations to the translation of the discourses surrounding venereal disease (VD) and mental hygiene into a regime of legal control were two royal commission reports on VD and feeble-

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mindedness in Ontario submitted by Mr Justice Frank Hodgins between 1918 and 1920.153 The commissioner pointed to what he described as irrefutable links between prostitution, venereal disease, and feeblemindedness and to the dangers to Canadian society if steps were not taken immediately to combat all three. The answer on VD was strong legislation, a draft of which the judge submitted with his interim report in 1918. This would have given public health authorities the powers required to get at the sources of infection and to isolate them. Feeble-minded women who prostituted themselves were to be a primary target of the new regime of surveillance and control. The particular culpability of prostitutes for spreading VD was accentuated by much of the propaganda and educational material put out by the public health and mental hygiene establishment, particularly by the voluntary National Council for Combatting Venereal Disease.154 According to the pamphlets of the council, all prostitutes and loose women were diseased, and although married women often contracted the disease through their husbands, single women who were infected were invariably thought to be prostitutes. Several provinces, including Alberta, British Columbia, and Ontario, introduced legislation between 1918 and 1920 empowering public health authorities to control and move against sources of infection.155 These statutes provided for compulsory examination, treatment, and detention of persons convicted under the criminal code or provincial statutes and persons charged with offences who were suspected of being infected with VD. In Alberta and Ontario medical health officers were also authorized to enter any house to seek out those who might have venereal disease and to remove for treatment anyone found to be infected. Moreover, in all three provinces any person infected with VD who failed to seek treatment was subject to a fine.156 The publication in the annual reports of the chief constable of Toronto from 1920 of figures for charges for breaches of the Ontario VD legislation suggests that some authorities were not slow to enforce these repressive provisions.157 Moreover, the location of these statistics suggests that from early days these enactments provided a medium of collaboration between the medical health authorities and the police. The former group no doubt needed the latter to take on some of the disagreeable work of entry into premises and physical restraint of the occupants. The latter seem to have welcomed the opportunity of

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extending their options for controlling prostitution and for further harassing the more incorrigible members of the sisterhood. The record in other cities, particularly in Calgary, suggests that it was not considered necessary to bring prosecutions directly under venereal disease legislation. The desired results of treatment and containment could be achieved by charging prostitutes under the criminal code and detaining them until they had been examined under the VD act. If found to be infected, they were given a jail sentence and incarcerated until certified as no longer being sources of infection.158 By 1920 a public health discourse that supported an intrusive regime of regulation and control of those either suffering from or suspected of being infected with VD was well entrenched in Canada. Its rationale and solutions were attractive to both the advocates of moral reform, who saw it as yet another weapon in the crusade to suppress prostitution and cure its horrendous social consequences, and to the proponents of public order, who were pleased to have another strategy to control the 'deviant' population and to impress the public with their 'resolution' to stamp out vice. The Social Construction of Prostitution Law and the Dynamics of Law Enforcement By identifying various vocabularies of censure and resistance this essay has examined the inconsistencies, discontinuities, and points of tension that have existed in the development of the law and its enforcement and application to prostitution-related conduct. In the process an analysis has been made of the several phases in the censure of prostitution in Canada, and the differing discursive content of each has been described. It has also been demonstrated how elements of both competing and complementary discourses have become embodied in the law and have, in turn, affected its implementation. Competing Vocabularies It is the conclusion of this study of vocabularies of censure and resistance that in the period 1892-1920 there were as many as six clearly operative discourses surrounding the relationship between law and prostitution-related conduct. These were discourses associated various-

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ly with tolerance of prostitution, its moral censure, a radical feminist critique of gender relations, notions of public order, an embryonic rights consciousness, and the concerns of public and mental health professionals. Four of these discourses, which were dominant during the period, supported identifiable conceptions of the role of law in dealing with prostitution. (1) Pragmatic tolerance reflected the belief that prostitution as a social phenomenon is not susceptible of eradication. Accordingly, the participants ought to be allowed to conduct their affairs without (or with only minimal) intervention by the state, as long as they complied with limitations established by both political and law enforcement authorities and as long as there were no breaches of other elements of the criminal law. While the proponents of this line of discourse were often prepared to censure prostitution on moral grounds, their attitude to its legal control suggested elements of resistance to its censure. The legal regime supported by this discourse was a system of compliance-informal regulation. It depended on the development of a partially consensual arrangement between law enforcement authorities and practitioners of prostitution as to the conditions under which prostitution would be tolerated. To that extent it was a form of private social control. As long as the tacit agreement was observed and the incidence of prostitution was being regulated effectively, operation of the criminal law was suspended. The application of sanctions was a second-order strategy and warranted only where the consensus broke down or was abused by practitioners of prostitution. (2) The moral discourse on prostitution proceeded from the belief that prostitution can be suppressed. The strong premise of its champions was that prostitution is both morally and legally censurable. It is a view that displayed an ultimate faith in the instrumental ability of criminal law sanctions to effect durable social change. The discourse inspired adoption of a sanction-suppression model of law. In this a punitive and a deterrent or didactive sanction was considered to be in order whenever an individual was convicted of a prostitution-related offence. (3) The public health discourse proceeded not from the belief that prostitution could be suppressed but from a firm conviction that its practitioners needed to be controlled and, if necessary, repressed, in order to minimize the public health risks associated with the sex trade. The activity might be subject to moral censure. More important to the

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public and mental health professionals, however, was application of a mode of legal censure that would impress on its practitioners the need to exercise restraint in sexual matters. Here the legal model that reflected the discourse was that of compliance-formal regulation. Like the compliance-informal regulation model, penal sanctions were designed to be secondary and to be invoked only if compliance were not secured. However, in contrast to the informal model, this system was the product of instrumental legislation which supported a highly directive and intrusive control regime, designed to change the practice of prostitution. (4) The public order discourse was a hybrid that embodied some but not all the elements of the other three. It accepted some of the premises of pragmatic tolerance, while eschewing inactivity, and rejected the notion that prostitution could be completely suppressed, while acknowledging the form of the system of sanctions supported by the moral discourse. It was in effect a regime of visibility control: it supported a system of selectively applied criminal law sanctions that enabled law enforcement authorities to preserve various visions of public propriety and public order, while in reality only informally regulating the practice. In this model the criminal law served merely as a palliative. The official rhetoric preached both moral and legal censure, while actions sometimes betrayed traces of the sort of resistance to legal solutions associated with the discourse of tolerance. The conception of law that it embodied was that of sanction-control. Criminal law sanctions were employed, but not with the object of suppressing prostitution. A primary objective was to demonstrate to the practitioners of prostitution that they were at the mercy of the police, who could as easily prosecute them as turn a blind eye. In this way a subtle form of control was exercised over the trade, which was forced to operate in an uncertain borderland between legality and illegality. There was some room for negotiation of terms, but in this instance the terms were more often than not dictated by the police. During the period 1892-1920 the moral discourse gained ascendancy over the regime of pragmatic tolerance that had prevailed in many Canadian communities previously. It did so because moral reformers were able to create fear and concern among both politicians and the public about what they saw as the dire social effects of prostitution. This moral discourse drew further impetus from medical concerns over the adverse effects of prostitution on public health and mental hygiene as

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described by public health professionals. The powerful combination of these vocabularies of censure was to affect profoundly the development of both social policy on prostitution and its embodiment in legal regimes of sanction (predominantly in the criminal code) and intrusive regulation backed up by penal sanctions (the primary example being the VD acts). While a moral rhetoric calling for the censure of prostitution had a decisive effect on the formal statement of the law, its operation in practice was driven by the rationale of public order, complemented, to some extent, by public health and mental hygiene strategies. The apparent discontinuity between rhetoric and practice is explained partly by the discretionary power of police, prosecutors, and the magistracy in interpreting and deploying legal sanctions. Unconvinced that prostitution was susceptible to suppression but sensitive to the need to preserve their image as the guarantors of the peace and safety of middle-class Canadians, they created a regime in which., by a combination of discretionary law enforcement and largely symbolic sanctions, they were able to convey the impression that they controlled public order. Even during the period of excited demands to eradicate the 'social evil,' the enforcement regime was very much one of containment - a matter of keeping the lid on the situation. The fifth and sixth discourses identified - the legal 'rights' discourse of criminal defence lawyers and some superior court judges and the radical feminist critique of gender power - existed alongside the waning discourse of tolerance. The rights discourse seems to have supported no comprehensive conception of how law should treat prostitution. Indeed, its proponents would in large measure have seen themselves as the interpreters of the law, not its architects. Their concern was merely to preserve common law protections against over-zealous legislators and hypocritical law enforcers in the context of particular cases. The radical feminists had a more clearly defined and comprehensive agenda of legal change which involved decriminalizing the activities of prostitutes and toughening the criminal law against exploiters. By and large the discourses that embodied vocabularies of resistance fell on deaf ears. Neither the political nor the social tenor of the times was sympathetic to even modest evocations of civil libertarian sentiment or arguments stressing socio-economic responses to prostitution. Consequently, these claims languished at the margins of public debate

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and discussion. The reality of resistance implicit in the decision of disadvantaged women to engage in prostitution continued despite the debate and dialectic surrounding it, although that discourse lacked effective support in the community at large and thus any voice in the determination of social or legal policy. The various elements of discourse identified by this study have endured, although their relative impact and importance may have waxed or waned. Since 1920 the primary discourse in characterizing and dealing with prostitution as a social problem has been that of public order, reflecting a fading of social purity concerns and the strengthening of professionalized police imperatives, which have required not the eradication of prostitution as much as its containment.159 The public order discourse has also periodically converged with the concerns of public health officials, producing more activist stances by law enforcement authorities, especially in the Second World War, a period of perceived national emergency. I6° More recently, the evidence suggests that the highly instrumental vision of the public health establishment traced earlier has been replaced by the view that policies designed to encourage voluntary decisions to undergo treatment for sexually transmitted diseases are more likely to produce positive results. It remains to be seen whether this change of direction in public health thinking can survive profound contemporary concerns about AIDS, a problem that must seem to the public health community as intractable as did gonorrhoea and syphilis a century ago. Although the public order discourse has been in the ascendant since 1920, the commitment to it has sometimes been more in the realm of rhetoric than of action. In one or other and often more Canadian cities there have been periods of unofficial tolerance of prostitution, as long as it has remained confined to discrete and run-down areas or to private establishments, in which it has been out of sight and mind of respectable society. In some cities, Vancouver being a prime example, there have been instances in which the shadowy line between passive tolerance and active graft has been transcended.161 In the midst of these departures from the active enforcement of the prostitution laws, the cry has always been that the law is being vigorously enforced. The discourse of toleration, insofar as it has survived, has become less audible in the public domain. For a period of some thirteen years after 1972 the power of the public

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order discourse in legitimating police enforcement practices became somewhat problematic because Parliament and the courts had redefined the nature of street prostitution. The repeal of the old vagrancy offence of street-walking (Vag. c) and its replacement by an ostensibly gender-neutral soliciting provision were the direct result of the re-emergence of a feminist discourse on prostitution. The latter, which was embodied in the Report of the Royal Commission on the Status of Women, recognized clearly the economic and social roots of prostitution and characterized prostitutes as victims rather than deviants.l62 The report concluded that the status offence of street-walking, which was limited by its nature to women suspected of being prostitutes, was discriminatory and unacceptable in a country in which a commitment to the social, economic, and legal equality of the sexes had developed.163 This position was supported by organized civil libertarian sentiment which had grown in the country since 1945. The police, who initially supported the change to a new soliciting law because it seemed to provide them with a means for harassing transsexual prostitutes, ultimately turned against it when they concluded that it had actually limited the control that they could exercise over the streets at a more general level. Although there is evidence that some police forces, notably Vancouver's, abandoned the soliciting law without even trying to enforce it resolutely, several decisions of the Supreme Court of Canada persuaded police across the country that repeal was necessary.164 The court, quite correctly divining that it was Parliament's objective in repealing Vag. c and replacing it with section 195. i to substitute a nuisance for a status offence, emphasized the need for something in the conduct of the accused that could be labelled as genuinely noisome.165 In this it is possible to detect an element of the type of 'rights' discourse noted for the earlier period. For police who were used to invoking the law at will to pick up and charge prostitutes whenever and wherever they wished without challenge, this was simply an unacceptable abridgment of their power. The new version of section 195.1 introduced in 1985 represents a substantial concession to police pressure.l66 While it avoids limiting the application of the provision to the female partner, it effectively removes any requirement of conduct that could be described as noisome. A 'wink or a nod' is sufficient. In the process the public order discourse has proved its power and durability, even in the face of strong feminist and

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civil libertarian arguments.167 It remains to be seen how the tension between the public order discourse and the feminist and civil libertarian discourses, which favour decriminalization of at least the conduct of the prostitute, will be resolved in the context of the Charter of Rights and Freedoms.168 Although the strong moral discourse of the early decades of this century is now espoused only by minority fringe groups who would have all Canadians bound by their religious and moral precepts, the moral equation still exercises an interesting symbolic function. With the notable exception of the law relating to street prostitution and steps taken to make all prostitution offences gender-neutral, the bulk of the law in the Criminal Code relating to prostitution reads substantially as it did in 1920. Despite recommendations that it be updated, most notably in the report of the Fraser Committee,169 federal legislators have proved singularly disinclined to do so. This is the case even though there is some evidence that a majority of Canadians would not oppose such steps.170 The formal evocation of the moral discourse of the early years of this century thus remains basically intact, as a sort of moral 'bottom line' beyond which our federal politicians do not seem prepared to go. In this they are supported by activists in communities that are adversely affected by street prostitution. The latter, while professing to be impelled only by pragmatic concern to clean up their neighbourhoods in short, to move the problem out - often exhibit the zeal of the social purists and in fact worry openly about the moral quality of life in the areas in which they live. As a result they have favoured stiffening the law relating to street prostitution and have opposed any attempt to water down the law on other prostitution-related conduct.171 The Social Construction of Prostitution The discourses relating to prostitution that we have identified live on, as to a significant degree do the competing conceptions of law that they embody. It remains to determine what the historical record reveals about the relative power of discourse in fashioning operative legal responses to this activity. The application of Foucaultian theory of the constitutive power of discourse to sex and sexuality has drawn attention to the significant

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impact of the discourse of professionals, especially that of physicians and psychiatrists, in constructing sexuality as an object of both investigation and control.172 Foucault relates this phenomenon to the transition of western European culture from the dominance of a shared religious order and its moral imperatives to a secular rationalism, residing in science and the professional institutions, that evolved during and after the Enlightenment. The operation of the power of professional knowledge and the discourse that it supports is evident in the capture of prostitution as an issue of both medical and social concern by the public health community and the translation of that concern into repressive regulatory regimes. Walkowitz has described how this power was played out in the enactment and enforcement of the Contagious Diseases Acts in Britain.173 As Cassel has demonstrated,174 it is apparent too in the wedding of epidemiological arguments to moral discourses on prostitution in Canada. The success of the campaign for the control of venereal disease in Canada after 1914 and the combination of medical and legal instrumentalism that it involved are a compelling example of the power of professional discourse in defining, shaping, and driving legal strategies of control of both the medical and moral consequences of sexuality. The impact of moral discourse at the level of formal articulation of the law is more difficult to explain in Foucaultian terms. Foucault tends to discount the claim that the nineteenth-century moral discourse on sex and sexuality was repressive in its essence, preferring to see the extensive debate within society in that century and beyond as indicative of a positive interest in and of an urge to reclassify human sexuality.I75 What is not developed in Foucault's analysis is the role of the emergence within nineteenth-century Western society, especially its English-speaking component, of a powerful strain of evangelical Protestant religion, rooted in a tradition of individual responsibility, but now combined with a liberal commitment to instrumental social change. This combination of moral and scientific reason created a hybrid ideology - a social Christianity rooted in liberal rationalism - capable of justifying social engineering in both religious and secular terms. The result was an extremely persuasive discourse which converted the legal characterization of prostitution and its exploitation from that of social irritant to that of thoroughly corrosive and serious deviance. The

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legislative embodiment of the discourse was a repressive regime, reflecting a clearly stated commitment to a very restricted notion of legitimate sexual practice.176 How does one explain the relative ineffectiveness of the moral reform agenda when it came to the application and enforcement of prostitution laws? From what we have said, it must be apparent that the anti-white slavery campaign had a tremendous impact in galvanizing the middle class and ultimately both the federal government and Parliament into a commitment to fashion a more moral Canada. The formal statement of the anti-prostitution laws exhibits clearly that intense reformist concern. It might be argued, as Gusfield has done in the case of the crusade for prohibition in the United States,1"77 that the campaign against white slavery had a symbolic significance which outweighed the lack of practical success of the campaign. For members of the Prohibition movement, a traditionalist 'status' group seeking to revive its waning power and prestige, the very act of securing legislative recognition for their traditional values in the Volstead Act, Gusfield suggests, was a victory in and of itself and was to be savoured, even though enforcement was less than perfect.178 The record that we have examined certainly suggests that there were some Canadian reformers who seemed content with the mere fact of legislative change relating to prostitution. It is difficult, however, to conclude that the leaders of the anti-prostitution movement were committed to anything less than instrumental suppression. Moreover, unlike Gusfield's characterization of the us prohibition lobby, the anti-white slavery movement in Canada was no outdated locus of traditional political and social power. It was in the mainstream of political and social activity in this country, with an ability to rely on powerful connections, and was much more clearly a reflection of class consciousness and division than the American prohibition campaign.I79 It was, as a consequence, more influential and its message potentially more durable. The explanation for the ineffectiveness of the moral discourse in practice requires an appreciation of the realities of how the power of the state is applied in dealing with conduct that is labelled deviant. Marxist theorists have variously argued that in a pluralist liberal democratic society law, like the state, is either a tool of class domination or a semi-autonomous entity charged with the task of resolving the inevita-

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ble contradictions of capitalist social order.180 This study certainly shows how the dominant interests of the middle class became enshrined in legislation on prostitution. It is quite possible to read into the record of the reformist campaign a paternalistic desire to achieve conformity among the working class to a middle-class script. Moreover, with the notable exception of those on the left wing of progressive thought of that era, there was little in the way of recognition that prostitution and other 'vices' were closely associated with the realities of socio-economic exploitation and deprivation, aggravated by disparities in wealth and opportunity created by industrial capitalism. Explanations in terms of purely economic interpretations of class struggle, however, seem to us insufficient to explain the exercise of the state's power in this context. Indeed, if the story of the anti-white slavery movement simply reflected the application of economic power by the dominant class, then one would not expect to find the gap that clearly existed between the objectives of the law and its application in practice. Explanations in terms of the inherent contradictions of capitalist social order seem to be closer to the mark. The record examined in this essay supports the notion that the state is not invariably a monolithic entity, harmoniously striving to secure certain agreed interests. What is particularly noticeable in both the formation and the administration, but particularly the latter, of the prostitution statutes is the extent to which they are subject to the influence of professional values and impulses. In some respects there was a community of interest between middle-class reformers and professional opinion. We have seen evidence of that in the social purists' support of the campaigns by public health physicians and mental hygienists for greater control of deviants and the feeble-minded. It also existed between the reformers and the embryonic social work and child care professions. Indeed, it was in the realm of the legal control of actual or apprehended deviance in the young that the moral reformers achieved their greatest degree of practical success. This reflected a clear identity of interest and objectives between the reformers and the earliest generations of social work and child care workers, who came typically from reformist ranks.181 A much more limited community of interest existed between the reformers and another important - arguably, the most important professional group, the police. A central theme in our analysis is how

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criminal law, which is crafted to serve directly dominant class interests, is either redefined or subverted to satisfy the immediate institutional contingencies of policing and the values of police culture at the level of enforcement and application. The middle-class values that explain the form and substance of the law are refracted through a prism which is coloured by police values, biases, and imperatives. This is true whether the police themselves or their sympathizers, in particular the magistrates, are holding the prism. The reason is quite simple. Government, in the name of society, chose to delegate the task of enforcement of the criminal law to a group of professionals who, in terms of their social roots, were working class rather than middle class and who, while committed to the middle-class vision of a stable, ordered society, looked upon themselves, and not their sponsors, as the best judges of how to achieve that objective. From this perspective, control ideology is not all of a piece. Our examination of various demands for legislative change or more effective law enforcement in relation to prostitution indicates a considerable amount of tension between the various control groups and institutions involved. Although those in government and the police and judiciary generate their own forms of discourse about prostitution, they also appropriate elements of other discourses to serve their own purposes and beliefs, in a way that creates a variety of contradictions and conflicts within and among control institutions. The police have been particularly prone to the chameleon-like practice of combining or co-opting various vocabularies of censure and, indeed, of sloughing off certain elements when it serves their own interests to do so. The conduct of the police during the anti-white slavery campaign demonstrates a general and normally unspoken commitment to tolerance of prostitution within the limits and constraints that they, the police, improvised. This policy stemmed from both pragmatic concerns about efficacy and efficiency and, in certain contexts, a degree of empathy with the particular deviant population. This did not prevent the police, however, from assuming the discourse of either the moral reformers, in order to create the illusion of principled commitment to the suppression of prostitution when the political and community heat became too intense, or of the public health lobby, to justify repression of prostitution in circumstances in which they had persuaded themselves that they required additional control techniques.

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While Foucault prefers to analyse power in terms of particular and dispersed loci of knowledge rather than as simply or only an aspect of political economy, he does recognize that the state is quite capable of appropriating particular elements of discourse to assist in the establishment of mechanisms of social control.182 In this sense Foucault's linkage of power with the knowledge of professional groups can be related to and inform the study of the police both as an arm of the state and as a professional group with its own sense of mission and its own peculiar goals. Foucault refers to the police as an important agency for diffusion of the disciplinary mechanism of control by surveillance throughout the community - 'disciplining the non-disciplinary spaces.'l83 His treatment of the police is, however, brief and reflects an essentially continental European view of the police function as an integral and necessary part of the apparatus of government. There is a need to consider the sources, nature, and power of police discourse on prostitution in an Anglo-North American context. In the latter, in part because of traditional antipathy to the notion of the police as an 'arm' of the state, the police enjoy significant operational autonomy. The bodies of knowledge on which Foucault has focused are the product of research, experimentation, scientific observation, and the systematization of the knowledge so acquired. This cannot be claimed for the knowledge that the police profess. Police work, by virtue of its essentially contingent nature, is highly pragmatic, reactive, and political. Police discourse is the rationalization of a mode of thinking developed in the context of the tensions and dramas of day-to-day life; it can be both resistant and adaptive as it reacts to or absorbs outside opinion. The laboratory of police work and the locus of its discourse have been and continue to be the street. But the intensely pragmatic nature of the discourse does not necessarily limit its power. Indeed, because the police see themselves and are seen by many in the community as 'in the trenches' in establishing and maintaining social order, and because there have a monopoly on information on the environment in which they work, it is difficult for critics to question, let alone challenge, their assumptions and practices. As a consequence it is often they who both define the problems and construct the solutions, using considerable discretion in the process. Moreover, the fact that the discourse is subject to manipulation on police terms makes it exceptionally difficult in some

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instances to determine exactly what the police think and thus where they stand. Part of the power inherent in this mode of discourse is the ability of its practitioners to dissimulate. Literature on policing in North America invariably offers dichotomous models of police work. Distinctions have been drawn between the functions of deterrence and compliance in police work,184 between the crime-investigation and the peace-keeping models of policing, and between due process and social control as its competing objectives.185 These theories accept a tension in policing between a felt obligation to enforce the law according to its terms and desire to follow a guiding concept of social order that may suggest other more flexible responses. While the reality is that elements of both models apply, most commentators on policing in the context of morals laws, and especially prostitution, have concluded that the social-control model is preeminent. For both pragmatic and philosophical reasons the police use a combination of formal and informal measures in enforcement, which frequently results in the regulation of conduct rather than in its direct sanctioning. The result is the exercise of a greater degree of discretion in the application of the criminal law to morals offences than would be true in the case of property crime, for instance. The dichotomous model does not fully capture the contingencies of policing prostitution in relation to the wider control apparatus of which it is a part. In particular, it fails to articulate clearly enough and to explain the hybrid character of the public order approach to enforcement of prostitution law. The police have proved adept at achieving what they consider to be a tolerable level of order on the streets and in public places by a combination of selective and episodic application of sanctions, the explicit and implicit threat of more and greater sanctions, and a range of informal means of harassment. While this approach might be characterized as a form of crime control, it seems to be a far cry from a system of enforcement that accepts without question that a form of conduct is deviant and that its practitioners, if caught, should invariably feel the full force of the law. Insofar as it is a system of the sanctioning of undesirable conduct, its objective is to reduce the visibility of a form of relatively minor deviant conduct, rather than to punish it or to deter its practitioners in any long-term sense. By the same token, while it manifests some attributes of a system of regulation, which assumes a fair degree of operational

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discretion, it clearly lacks the elements of fairness and due process that are typically associated with legislated regulatory regimes. Indeed, the very essence of the police approach in enforcing prostitution laws is to leave the players in the trade, especially the prostitutes, guessing as to their legal status. This uncertainty about whether conduct is licit or illicit and the manipulation of the deviant population which it allows are the main bulwark of the system of control. The reason for the tenacity of this model of law enforcement is the inherent ambiguity in the overall control system toward prostitution. The formal message contained in the complex of provisions in the Criminal Code is itself ambiguous, because while certain forms of conduct surrounding prostitution are labelled criminal, prostitution itself is not. The more substantial problem is that a number of the provisions in the code are unenforceable. Some of them, especially those relating to procuring, even if they ever were a reflection of actual social conditions, have little relevance today. Others, especially those relating to bawdy-houses and street prostitution, which are enforced more regularly, are not seen by the police as enforceable in the sense that the sponsors of such provisions may have wished. Even if the police wanted to enforce these sections of the code with unremitting vigour, the lack of resources and the existence of more pressing priorities would stand in the way of securing that objective. Given this gap between the formal statement of legal policy relating to prostitution and the felt realities of law enforcement, a system that allows the police to appeal to the rhetoric of crime control, while being able to exercise at least a modicum of social control by less draconian means, is essential to police operations. Its durability is testament to the adept way in which the police have been able to manipulate it over the years, giving the impression of resolution, while using far more subtle means of controlling it. As a result, at least since 1913, the police have been effectively the main arbiters of legal (it could well be argued social) policy relating to prostitution in Canada. Notes Our thanks are owed to colleagues who read and gave us critiques of earlier drafts, in particular, Mimi Ajzenstadt, Colin Campbell, Jamie Cassels, Dorothy Chunn, Janet Giltrow, Dale Phillipe, and Colin Sumner.

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Securing Compliance 1 J. Murray, Strong Minded Women and Other Lost Voices from Nineteenth Century England (New York: Pantheon, 1982) 409-412: excerpts from W. Greg, Why Women Fail (1850) and W. Lecky, The Social Function of Prostitution (1869). 2 Ibid., 427-8: excerpt from W. Acton, The Need for Legislation (1870). Licensing systems were widespread in nineteenth-century continental Europe: see A. Flexner, Prostitution in Europe (Montclair, NJ: Patterson Smith, reprint of 1914 report for Bureau of Social Hygiene) and are operative today in a number of European countries, including Denmark, Holland, and West Germany. In Britain licensing was introduced in 1866 under the controversial Contagious Diseases Acts, 27 & 28 Viet., c. 85, 29 & 30 Viet., c. 96, and 32 & 33 Viet., c. 86, but repealed in 1886: see J. Walkowitz, Prostitution and Victorian Society: Women, Class and the State (Cambridge: Cambridge University Press, 1980). The only common law jurisdiction with a comprehensive licensing system in modern times is the state of Victoria in Australia. The us state of Nevada operates a county option system for regulated prostitution. 3 See C. Backhouse, 'Nineteenth Century Canadian Prostitution Law: Reflection of a Discriminatory Society' (1985) 18 Social History 387 at 390-3. 4 Social Survey Commission, Report (Toronto: Carswell Co., 1915) 19-32; J. Bedford, 'Prostitution in Calgary, 1905-1914 (1981) 29 Alberta History i; D. Nilsen,' "The Social Evil": Prostitution in Vancouver, 1900-1920' in B. Latham and C. Kess, eds., In Her Own Right (Victoria, BC: Camosun College, 1980) 208; L. Rotenberg, 'The Wayward Worker: Toronto's Prostitute at the Turn of the Century,' in J. Acton, P. Goldsmith, and B. Shepard, eds., Women at Work: Ontario, 1850-1930 (Toronto: Canadian Women's Educational Press, 1974) 57. 5 M. Connelly, The Response to Prostitution in the Progressive Era (Chapel Hill: University of North Carolina Press, 1980); R. Rosen, The Lost Sisterhood: Prostitution in America, 1900-1918 (Baltimore: Johns Hopkins University Press, 1982); Walkowitz, Prostitution; J. Cassel, The Secret Plague: Venereal Disease in Canada 1838-1939 (Toronto: University of Toronto Press, 1987). 6 These are species of what C. Wright Mills referred to as 'vocabularies of motive'; see section 'Situated Actions and Vocabularies of Motives' in Power, Politics and People (New York: Oxford University Press, 1940). See also D. Melossi, 'Punishment and Social Action: Changing Vocabularies of Punitive Motive within a Political Business Cycle' (1985) 6 Current Perspectives in Social Theory 169; D. Melossi, 'The Law and the State as Practical Rhetorics of Motives: The Case of Decarceration,' in J. Lowman, R. Menzies, and T. Palys, eds., Transcarceration: Essays in the Sociology of Social Control (Aldershot: Gower, 1987) 27. 7 See M. Spector and J. Kitsuse, Constructing Social Problems (Menlo Park, Calif:Cummings, 1978); C. Sumner, 'Rethinking Deviance: Toward a Sociology of Censures' (1983) 5 Research in Law, Deviance and Social Control 187.

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Enforcing Canada's Prostitution Laws 8 See, e.g., J. Lowman, 'Prostitution in Vancouver: Some Notes on the Genesis of a Social Problem' (1986) 28 Canadian Journal of Criminology i; J. Lowman, Street Prostitution: Assessing the Impact of the Law (Ottawa: Department of Justice, 1989). 9 A. Reiss, 'Consequences of Compliance and Deterrence Models of Law Enforcement for the Exercise of Police Discretion' (1984) 47 Law and Contemporary Problems 83. 10 J. Skolnick, Justice without Trial 2d ed. (New York: Wiley, 1975). 11 See Backhouse, 'Prostitution Law' 388-90. The legislation of the former colonies was consolidated in An Act Respecting Vagrants, sc 1869, c. 28. 12 Ibid., 396-415. 13 See J. Fingard, 'The Social Evil in Halifax in the Mid-nineteenth Century' (Department of History, Dalhousie University, 1977) [unpublished]; J. Fingard, 'Jailbirds in Victorian Halifax,' in P. Waite, S. Oxner, and T. Barnes, eds., Law in a Colonial Society: The Nova Scotia Experience (Toronto: Carswell Co., 1985) 81. 14 For helpful analysis of this concern about the lawlessness of the working class, see J. Weaver, 'Crime, Public Order and Repression: The Gore District in Upheaval, 1832-1851' (1986) 78 Ontario History 175; H. Graff, ' "Pauperism, Misery and Vice": Illiteracy and Criminality in the Nineteenth Century' (1977) n Journal of Social History 245; J. Phillips, 'Poverty, Unemployment and the Criminal Law: The Operation of the Vagrancy Laws in Halifax, 1867-1890' (Paper to American Legal History Society Conference, Toronto, October 1986) [unpublished]. That the social conservative political establishment was capable of adopting novel initiatives to deal with problems thrown up by the working class is evident in the espousal of contagious disease legislation in the i86os (see Backhouse, 'Prostitution Law' 390-3). 15 This was particularly true of Toronto. See N. Rogers, 'Serving Toronto the Good,' in V. Russell, ed., Forging a Consensus: Historical Essays on Toronto (Toronto: University of Toronto Press, 1984) 116. 16 See Weaver, 'Crime' 184-6; Backhouse, 'Prostitution Law'415-16. 17 See D. A. Watt, Moral Legislation: A Statement Prepared for the Information of the Senate (Montreal: Gazette Printing, 1890). This booklet was published as part of Watt's campaign for inclusion of provisions protecting women and children from sexual predators in the Criminal Code. 18 G. Parker, 'The Origins of the Canadian Criminal Code,' in D. Flaherty, ed., Essays in the History of Canadian Law, Vol. i (Toronto: University of Toronto Press, 1981) 249. Reform of the law occurred outside the confines of the code as well. Legislation was also enacted to enable the authorities to remove girls and women who were already prostitutes, and girls who were considered to be in 'moral' danger, to reformatories or industrial schools where 'right attitudes' could be inculcated (see Backhouse, 'Prostitution Law' 415-19).

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Securing Compliance 19 Conservatives and reformers with different objectives were quite capable of working together to make life tough for prostitutes, as in the combined efforts of the moral reformer mayor of Toronto, W.H. Rowland, and Morality Inspector Archibald in suppressing vice in the city during the 188os - see C. Armstrong and H.V. Nelles, The Revenge of the Methodist Bicycle Company (Toronto: Peter Martin, 1977) 8. 20 Criminal Code, sc 1892, c. 29. 21 Parker, 'Origins' 268. 22 sc 1892, c. 29, s. 207 (i), (j), (k). 23 Ibid., s. 198. 24 Ibid., s. 185(3). 25 Ibid., s. 185(3). 26 Ibid.,s. i8s(b), (c). 27 Included were provisions relating to carnal knowledge of a girl under fourteen years of age or of a female known by the accused to be an idiot, imbecile, insane, or deaf and dumb; seduction of a girl, of a woman under twenty-one years under promise of marriage, of a ward or a factory, workshop, or mill employee 'of previously chaste character,' or of a female passenger on a vessel; procuring of the defilement of a girl or woman by a parent, guardian, or householder; abduction of a girl or a woman, in particular an heiress; and prostitution related to Indian women. 28 The use of the term discourse of tolerance is made in recognition that there was often a reticence among its proponents to avow it openly. However, during this period there were those, especially among the magistrates and police, who expressed public support for and sought to rationalize this approach. 29 J. Gray, Red Lights on the Prairies (Saskatoon: Western Producer, 1986) 17-18. 30 Ibid., 16. 31 Ibid., 8. 32 Nilsen, 'The Social Evil' 208. 33 See, e.g., coverage of the Stuart Inquiry into the policing of vice in Calgary in late 1907 and early 1908 in both the Herald and the Morning Albertan. 34 C. Stuart, Report of Commission of Inquiry into Certain Allegations against the Chief of Police of Calgary and the Calgary Police Force, 1908 (printed in full in the Morning Albertan, 28 January 1908). 35 See, e.g., Toronto Globe, 12 November 1910, 8. 36 See A. Artibise, Winnipeg: A Social History of Urban Growth (Montreal: McGill-Queen's, 1975)246-65;!. Cooper, 'Red Lights of Winnipeg' (1972-73) 29 Historical and Scientific Society of Manitoba Series in, 61. 37 H. Robson, Report of the Royal Commission on the Enforcement of Vice Laws in Winnipeg (Winnipeg: King's Printer, 1911) 7-8, 21. 38 Nilsen, The Social Evil' 208-15.

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Enforcing Canada's Prostitution Laws 39 Toleration also existed in some of the country's older communities. Two judicial inquiries during the period found that the Montreal police had been tolerating prostitution for years. See J.-P. Brodeur, La Delinquence de VOrdre (Montreal: Hurtubise, 1984). 40 Gray, Red Lights 15-16. 41 Cooper, 'Red Lights' 36. 42 Vancouver Province, I November 1912 et seq. 43 Archives of Ontario, Attorney-General's Files, RG 4, 04, File no 682, 1908. 44 Ibid., letter dated 21 October 1908. 45 R.St.J. Stubbs, 'The First Juvenile Court Judge: Hon. T. Mayne Daly K.C.' (1979) 10 Manitoba Law Journal 9. 46 Robson, Report, Minutes of Evidence 330-67. 47 The impetus to toleration was strengthened in certain communities by mercenary considerations. Local authorities anxious to secure income from fines and bail payments were prone to charging under municipal by-laws rather than under the Criminal Code and to pocket bail money without ever bringing the accused to court. See T. Thorner, 'The Not-So-Peaceable Kingdom: Crime and Criminal Justice in Frontier Calgary,' in A. Rasporich and H. Klassen, eds., Frontier Calgary: Town, City and Region (Calgairy: McClelland & Stewart, 1975)111. 48 C. Bacchi, Liberation Deferred: The Ideals of English Canadian Suffragettes, 1877-1915 (Toronto: University of Toronto Press, 1983) 8-12. 49 See J. Snell, ' "The White Life for Two": The Defence of Sexual Morality in Canada, 1890-1914' (1983) 16 Social History HI. 50 J.S. Woods worth, Strangers within Our Gates (Toronto: University of Toronto Press, 1972, reprint of original published in 1909). 51 P. Roy, 'The Oriental Menace in British Columbia,' in M. Horn and R. Sabourin, eds, Studies in Canadian Social History (Toronto: McClelland and Stewart, 1974) 289. 52 International Council of Women Congress, Report, Vol. i, 1909, 69-87. 53 R. Allen, The Social Passion: Religion and Social Reform in Canada, 1914-28 (Toronto: University of Toronto Press, 1973) 3-17; R. Cook, The Regenerators: Social Criticism in Late Victorian English Canada (Toronto: University of Toronto Press, 1985) 174-232. 54 See W. Mitchison, 'The wcxu: "For God, Home and Native Land": A Study in Nineteenth-Century Feminism,' in L. Kealey, ed., A Not Unreasonable Claim: Women and Reform in Canada 18805-19205 (Toronto: Women's Press, 1979) 151; V. Strong-Boag, ' "Setting the Stage": National Organization and the Women's Movement in the Late Nineteenth Century,' in S. Trofimenkoff and A. Prentice, eds., The Neglected Majority: Essays in Canadian Women's History (Toronto: McClelland and Stewart, 1977) 87. 55 The development of a legislative and administrative regime for protection,

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56

57 58 59 60 61 62 63 64 65 66

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68 69 70

education, and nurturing of children is but one example of this trend: see N. Sutherland, Children in English Canadian Society (Toronto: University of Toronto Press, 1976). The period was one in which social reformers such as J.S. Woodsworth, the Rev. Dr John Shearer, and later Charlotte Whitton were often the generators of studies, reports, and data designed to demonstrate the nature and dimensions of the social problems that the country faced and thus force the hand of government. Woodsworth was particularly active in this regard, taking personal responsibility for several 'social surveys' of Canadian cities in the 19105 (see, e.g., J.S. Woodsworth, Report of a Preliminary and General Social Survey ofRegina [Toronto: Department of Temperance and Moral Reform, Methodist Church of Canada, and Board of Social Service and Evangelism, Presbyterian Church of Canada, 1913]). J. McLaren, ' "White Slavers": The Reform of Canada's Prostitution Laws and Patterns of Enforcement, 1900-1920' (1987) 8 Criminal Justice History 53, 67-84. Ibid., 62-5. M. Connelly, The Response to Prostitution 114-20. United Church Archives, SamuelDwight Chown Papers, Box 13, File no, 369; speech to clergy on 'The Social Evil' (undated). National Council of Women, Handbook, 1912, 54. Moral and Social Reform Council of Canada, Draft Legislation, 1911, 5-6. Bacchi, Liberation Deferred 30-9; Cook, The Regenerators 78-85. Bacchi, Liberation Deferred 35-6. Ibid., 14. Ibid., 44-5, 86. Ibid., 24-9; W. Roberts, ' "Rocking the Cradle for the World": The New Woman and Maternal Feminism,' in L. Kealey, ed., A Not Unreasonable Claim: Women and Reform in Canada 18805-19205 (Toronto: Women's Press, 1979). A notable exception is the correspondence of an American prostitute, Maimie Pinzer, with Mrs Fanny Howe, a Boston philanthropist. For a period of time Pinzer lived and worked in Montreal. See R. Rosen, ed., The Maimie Papers (Old Westbury, NY: Feminist Press, 1977). Social Survey Commission, Report 37. See G. Boucher, 'The "Fallen Women" at Work: Prostitution in Vancouver 1890-1920' (1985) 3 The Ascendant Historian 130. There was almost certainly a popular and largely unwritten discourse created by those in the trade. To some extent this discourse was reflected in novels, plays, and popular ballads and songs of the era, although in some instances refracted through the minds of middle-class writers, dramatists, and composers. To date the sources of this discourse remain largely untapped.

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71 Criminal Code Amendment Act, sc 1913, c. 13. 72 Women's Christian Temperance Union Convention, Proceedings, 1913. The president, Sarah Rowell Wright, mentioned in her report (55-75) that the prime minister had indicated his support in a letter to her, as well as informing her that the government had made provision for the funding of police work against white slavery by the commissioner of the Dominion Police. 73 While the parliamentary debates reveal little of the motivation for these changes, the minister of justice, Judge Doherty, did allow that the amendments were designed to deal more effectively with white slavery. H.C. Debates, 1913, 10077. 74 Criminal Code Amendment Act, 801913,0. 13, s. i. 75 Ibid., s. 11. 76 Ibid., s. 29. 77 Criminal Code Amendment Act, 501915,0. 12, s. 7. 78 Ibid., s. 5. 79 Ibid., s. 6. 80 Criminal Code Amendment Act, sc 1907, c. 8, s. 2. 81 Criminal Code Amendment Act, sc 1917, c. 14, s. 3. 82 S. Russell, 'The Offence of Keeping a Common Elawdy-House in Canadian Criminal Law' (1982) 14 Ottawa Law Review 270, 275. 83 Criminal Code Amendment Act, sc 1913, c. 13,5. 9. 84 Ibid. 85 Ibid., s. 23. 86 Criminal Code Amendment Act, sc 1909, c. 9, s. 2 (Schedule). 87 Criminal Code Amendment Act, sc 1913, c. 13,5.9. 88 Criminal Code Amendment Act, sc 1920, c. 43, s. 18. Law reform reflecting the social purity agenda was not limited to amendments to the Criminal Code. Legislative steps were taken by some provinces to protect white female virtue from the supposed dangers to it in the employment of white women by oriental men. See Act to Prevent Employment of Female Labour, ss 1912, c. 17 (as amended); Act to prevent the employment of Female Labour in certain capacities, SMi9i3,c. 19; Act to Amend the Factory, Shop and Office Act, so 1914, c. 40, s. 2 (as amended); Municipal Amendment Act, SBC, 1919, c. 63, s. 13. The Saskatchewan legislation originally referred to 'Japanese or other oriental person.' Reference to Japanese was deleted in 1913 after representations by the Japanese government (ss 1912-13, c. 18). Manitoba's enactment made specific mention of Chinese and Japanese. The other two jurisdictions referred expressly or implicitly to Chinese. On another aspect of the legislative agenda, protection of children 'at risk,' see Sutherland, Children in English Canadian Society 91-123. 89 NCW, Handbooks 1914-20; WCTU Convention, Proceedings 1916.

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90 Social Service Council of Canada, Minutes of the Annual Meeting 1918, 17. 91 On the connection between increased activity by the police and the anti-white slavery campaigns in Calgary, Vancouver, and Toronto, see McLaren, 'White Slavery' 86-7. 92 B.H. Sanders, Emily Murphy - Crusader (Toronto: Macmillan, 1945) I3I-593 E. MacGill, My Mother the Judge 2ded. (Toronto: University of Toronto Press, 1981)141-58. 94 Vancouver City Archives, Board of Police Commissioners, Minutes, Series 75(8)4, File no. 5, letter to Commission, October 1919. 95 E. Murphy, 'The Women's Court,' Maclean's Magazine, January 1920. 96 Edmonton City Archives, Emily Murphy Papers, MG 2, Bench Book, 1917-18. 97 C. Mander, Emily Murphy - Rebel (Toronto: Simon & Pierre, 1985) 99. 98 Edmonton City Archives, Murphy Papers, MG 2, File no. 11. 99 H.-T. Taschereau, The Crime of Prostitution (Montreal, 1905, report to Montreal City Council, issued as a pamphlet by the Presbyterian Church of Canada, Toronto, 1909). 100 See F. Hodgins, Interim Report of Royal Commission on Venereal Disease (Toronto: King's Printer, 1918); F. Hodgins, Report of Royal Commission on Venereal Disease (Toronto: King's Printer, 1919); F. Hodgins, Report of Royal Commission on the Care and Control of the Feeble Minded (Toronto: King's Printer, 1920). 101 R. v. Quinn (1918), 30 ccc 372 (Ont. CA). 102 Ibid., 380. 103 Calgary Police Archives, Prisoner Record Book, 2 vols., 12 October 1913 - 8 October 1920; Toronto City Archives, Register of Criminals, 6 vols., 1912-20; Vancouver City Archives, Prisoner Record Books, 2 vols., 1912-17. Because of the large number of entries for Toronto, sample periods have been selected within the eight-year span. The periods are 10 April-10 October 1912, 1 March-3 September 1913, 5 October 1914-6 April 1915, i March2 September 1916, i January-4 July 1917, and i January-5 July 1920. The records from Vancouver do not contain references to all offenders who turn up in the court calendars. They are more selective, perhaps because the people included were those whom the police considered the 'hard core' of the trade. 104 The suspicion that the major focus of police attention was rooms and apartments is underlined by the fact that the median for multiple arrests in Vancouver during the period was three. The raid on the Utopian Club on 27 January 1913, which netted eleven people, was very much the exception. 105 Archives of Ontario, Ontario Central Jail, Register 1912-21. 106 See G. Homel, 'Denison's Law: Criminal Justice at the Police Court in Toronto, 1877-1921' (1973) Ontario History 171.

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107 The booking registers reveal that nothing changed in Denison's approach to sentencing after 1915, when keeping a common bawdy-house became an exclusively indictable offence. Although ostensibly subject to imposing a mandatory prison term, Denison was able to substitute a fine by invoking summary trial procedure, as he was entitled to do: see Criminal Code, RSC 1906, c. 146, ss. 773, 774 (as amended). 108 T. Thorner and N. Watson, 'Keeper of the King's Peace: Colonel G. E. Sanders and the Calgary Police Magistrate's Court 1911-1932' (1984) 12 Urban History Review 45. 109 Judge Emily Murphy sat with Col. Denison from time to time on visits to Toronto. She records that on one of these occasions Denison rejected a complainant's evidence, because, he said 'I don't like his mug.' See E. Murphy, 'A Straight Talk on Courts,' Maclean's Magazine, I October 1920, 9. 110 See G. Denison, Recollections of a Police Magistrate (Toronto: Musson, 1920) 58-60. 111 The Toronto Social Survey Commission (Report, 28-30) was clearly of the view that Denison and his colleagues were soft on vice. 112 Armstrong and Nelles, Revenge 8. 113 In referring to pragmatic considerations the authors are well aware that these reflect a value system that has its own moral assumptions. 114 Toronto City Archives, Annual Report of Chief Constable 1893, Appendix c. 115 Toronto City Archives, Annual Report of the Chief Constable, 1896, 1903, 1917, Appendix c. 116 Police chiefs of the era were on occasion given to professing vigorous commitment to the cause of smashing vice (see Bedford, "Prostitution in Calgary' 7-8, on Alfred Cuddy, the Calgary police chief). They normally reacted angrily to any suggestion that their forces were delinquent in enforcing the law on prostitution (see Toronto City Archives, Annual Report of the Chief Constable, 1915, Appendix c). 117 Social Survey Commission, Report 23-8. 118 Nilsen, 'The Social Evil.' 119 J. McLaren, 'The Canadian Magistracy and the Anti-White Slavery Campaign 1900-1920,' in W. Pue and B. Wright, eds., Canadian Perspectives on Law and Society: Issues in Legal History (Ottawa: Carleton University Press, 1988)

329, 333120 Vancouver City Archives, Annual Report of Chief Constable, 1913. 121 Nilsen, 'The Social Evil,' 122 See comments of Chief Williams of the London, Ontario, Police in Proceedings of the Ninth Annual Meeting of the Chief Constables' Association of Canada, 1913, Halifax, 48-50. 123 Typically, defence counsel would apply for an order to quash the conviction by invoking the writs of habeas corpus or certiorari, allowing the accused to

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125 126

127 128 129 130 131 132

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134 135

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Securing Compliance challenge defects of jurisdiction and errors on the record. This was considered preferable to proceeding with an appeal on a stated case or by a trial de novo, especially where a conviction had been secured on apparently firm evidence. By way of example see Glenbow Archives, McKinley Cameron Papers. Cameron was a leading criminal defence lawyer in Calgary and active during the 19108. His papers include a number of case files in which he took appeals on behalf of accused persons charged with prostitution-related offences. See also J. Gray, Talk to My Lawyer: Great Stories of Southern Alberta's Bar and Bench (Edmonton: Hurtig, 1987) 57-79. B. Harris, 'Locating the Love: The Prosecution of Dawson City's Prostitutes, 1898-1908,' paper, Faculty of Law, University of Calgary, April 1987. By the Criminal Code Amendment Act, sc 1907, c. 8, s. 2, the definition of 'common bawdy house' was amended to include single prostitutes working out of houses or rooms. M. Gilkes and M. Symons, Calgary's Finest: A History of the City Police Force (Calgary: Century Calgary, 1975) 57. R. v. Sands (1915), 25 ccc 116 (Man KB) 117. R. v. Marceau (1915), 23 ccc 456 (Alta sc) 458, referring to R. v. Miller (1913), 25 ccc 151 (Alta. sc). See R. v. Davidson (No. i) (1917), 28 ccc 44 (Alta sc). Stuart, Report of Commission. L. Knafla, 'From Oral Tradition to Written Memory: The Common Law Tradition in Western Canada,' in L. Knafla, ed., Law and Justice in a New Land: Essays in Western Canadian Legal History (Toronto: Carswell, 1985) 60-71. For examples of this concern to uphold the protections afforded by the common law in other contexts, e.g., sedition and prohibition cases, see Gray, Red Lights 75-9; R. v. Trainor (1917), 27 ccc 232 (Alta sc); R. v. Nat Bell Liquors Ltd. (No. i) (1920), 16 Alta LR 73 (Alta sc); R. v. Nat Bell Liquors Ltd. (No. 2) (1921), 16 Alta LR 149 (Alta sc). That these judges were at the same time ready to recognize 'social rights' is evident in the case of R. v. Cyr (1917) 29 ccc 77 (Alta sc). In that decision Alberta's Supreme Court concluded that there was no impediment at law in Alberta to a woman holding the position of police magistrate. Cassel, The Secret Plague 101-21. See generally J. Donzelot, The Policing of Families (New York: Pantheon Press, 1979); M. Foucault, The Birth of the Clinic: An Archaeology of Medical Perception (New York: Vintage Press, 1975). See Cassel, The Secret Plague 24-100. Although contagious disease legislation was not enforced in Canada, as it was in Britain, and was a dead letter by 1870, later provincial legislation establishing reformatories achieved a similar result by empowering a magistrate to extend a sentence to a reformatory

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139 140

141 142

143

144 145 146 147

148 149 150

151 152

Enforcing Canada's Prostitution Laws indefinitely if the female offender had any 'contagious or infectious disease' (see, e.g., An Act Respecting the Andrew Mercer Reformatory for Females, so 1879, c. 38,5.31). As Backhouse notes, the latter terms were code words for VD, the necessary implication being that 'women detained in these institutions must have been subjected to compulsory medical treatment' (Backhouse, 'Prostitution Law' 418). Connelly, The Response to Prostitution 11-27. Vice Commission of Chicago, The Social Evil in Chicago (New York: Arno Press, 1970 reprint of 1911 Report); Connelly, The Response to Prostitution 12-13. Connelly, The Response to Prostitution 14-16. Ibid., 70. As an example of this tendency, in 1904 Morrow announced the alarming and alarmist news that 60 per cent of adult men in the United States suffered from gonorrhoea or syphilis in their lifetime. Cassel, The Secret Plague 101-21. See, e.g., E. Bell, War on the White Slave Trade (Toronto: Coles Publishing, 1980, originally published 1909, Chicago: C. Thompson Publishing); C. Roe, The Great War on White Slavery (Chicago: Roe and Steadwell, 1911). Connelly notes that the Chicago Vice Commission report's estimate that there were at any one time five thousand prostitutes in the city was translated by a moral librettist into five thousand girls lost each year in that community (Connelly, The Response to Prostitution 119-20). Canadian crusaders such as the Rev. Dr Shearer felt no compunction about using these loose versions of statistical findings in their sermons, speeches and reports (see McLaren, 'White Slavers' 42-4, 49). Sutherland, Children in English Canadian Society 72. Ibid., 73. Ibid., 73-6. C.K. Clarke, 'Juvenile Delinquency and Mental Defect' (1920) 2 Canadian Journal of Mental Hygiene 228 at 229. In support of this contention he reported that over 90 per cent of 438 girls who were admitted prostitutes and were sent to the venereal disease and mental clinics in the Toronto General Hospital in the past two or three years were 'feeble minded or insane.' Ibid., 232. Sutherland, Children in English Canadian Society 78. S. Buckley and J. Dickin McGinnis, 'Venereal Disease and Public Health Reform in Canada' (1982) 63 Canadian Historical Review 337, 338. See also Cassel, The Secret Plague, 122-44. Buckley and McGinnis, 'Venereal Disease' 338-9. Cassel, The Secret Plague 145-75. This campaign had two major outcomes: enactment of repressive and intrusive public health legislation designed to

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157 158 159

160 161

162 163 164

165 166 167

168 169 170

Securing Compliance enforce diagnosis, quarantine, and treatment of carriers of infection, and provision of financial resources by the federal government to the provinces for the purpose of opening and operating VD clinics. Hodgins, Interim Report. Buckley and McGinnis, 'Venereal Disease' 348-9. Venereal Disease Prevention Act SA, 1918, c. 50; Venereal Diseases Suppression Act, SBC 1919, c. 88; Venereal Disease Prevention Act, so 1918, c. 42. As a complementary measure, the Criminal Code was amended in 1919 to make it an offence 'knowingly' or by 'culpable negligence' to communicate VD to another. See Criminal Code Amendment Act, sci9i9,c. 46, s. 8. Toronto City Archives, Annual Report of the Chief Constable, 1920 et seq., Appendix c. Calgary City Archives, Annual Report of the Chief Constable, 1919, 1939. The reasons for the fading of the social gospel and purity movements are discussed in J. Herd Thompson, Canada 1922-1939: Decades of Discord (Toronto: McClelland & Stewart, 1985) 58-75. See D. Williams, 'The Suppression of Commercialized Prostitution in the City of Vancouver' (1941), 27 Journal of Social Hygiene 364. J. Swan and L. Richardson, A Century of Service: The Vancouver Police 18861986 (Vancouver: Vancouver Police Historical Society and Centennial Museum, 1986). Report of the Royal Commission on the Status of Women in Canada (Ottawa: Queen's Printer, 1970) 369-75. Ibid., 369-72. The legislation responding to this part of the report was the Criminal Code Amendment Act, 1972 sc, 0-13, ss. 12, 15. For evidence of the policy of disengagement in Vancouver, see D. Winterton, "The Dilemma of Our Prostitution Laws' (1980) 9 Canadian Police Chiefs; J. Lowman, 'Prostitution in Vancouver: Some Notes on the Genesis of a Social Problem' (1986) 28 Canadian Journal of Criminology i. Hutt v. The Queen (1978), 38 ccc (2d) 418 (sec); R. v. Whitter and Galjot (1981), 64 ccc (2d) i (sec). See Criminal Code Amendment Act, sc 1985, c-5O, s. i. See, e.g., Canadian Advisory Council on the Status of Women, Prostitution in Canada (Ottawa, 1984); F. Shaver, 'Prostitution: A Critical Analysis of Three Policy Approaches' (1985) 11 Canadian Public Policy 493. The issue of whether the present version of s. 195. i offends the Charter is currently on appeal to the Supreme Court of Canada. Report of the Special Committee on Pornography and Prostitution, Vol. 11 (Ottawa: DOSS, 1985), 530-58. Peat, Marwick & Partners, National Population Study on Pornography and Prostitution, Working Paper No. 6 (Ottawa: DOSS, 1985).

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171 Lowman, Street Prostitution. 172 M. Foucault, The History of Sexuality, Vol. i: An Introduction, trans, by R. Hurley (New York: Vintage Books, 1980). 173 Walkowitz, Prostitution. 174 Cassel, The Secret Plague 145-205. 175 Foucault, Sexuality 17-49. 176 For an account of the information on sex and sexuality put out by the social purists and available to Canadians at the turn of the last century, see M. Bliss,' "Pure Books on Avoided Subjects": Pre-Freudian Sexual Ideas in Canada' (1970) Canadian Historical Association Papers 89. 177 J. Gusfield, Symbolic Crusade: Status Politics and the American Temperance Movement (Urbana: University of Illinois Press, 1963). 178 Ibid., 117-22. 179 See P. Rutherford, 'Tomorrow's Metropolis: The Urban Reform Movement in Canada 1880-1920' (1971) Canadian Historical Association Papers 203. 180 H. Collins, Marxism and the Law (Oxford: Oxford University Press, 1984). 181 On this association, see P. Rooke and R. Schnell, No Bleeding Heart: Charlotte Whitton, A Feminist on the Right (Vancouver: University of British Columbia Press, 1987) 19-44. 182 M. Foucault, Discipline and Punish: The Birth of the Prison, trans, by Alan Sheridan (New York: Vintage Books, 1979), 209-15. 183 Ibid., 213-16. 184 A. Reiss, 'Consequences of Compliance.' 185 J. Skolnick, Justice without Trial.

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2 Controlling Interests: Two Conceptions of Order in Regulating a Financial Market P H I L I P C. S T E N N I N G , C L I F F O R D D. S H E A R I N G , S U S A N M. ADDARIO, AND M A R Y G. C O N D O N Big-bucks money managers ... may, at times, ride with the bulls or the bears. But they are also sheep.1 With the lower animals, as with human beings, real insight into their character can only be obtained by treating them sympathetically ... ... Suppose, for instance, that one wishes to induce a rhinoceros to walk across a gangway from a ship to the quay. It is not enough to say, 'Please, dear Mr. Rhinoceros, will you be so kind as to walk across these planks', for the great herbivore will fail to understand such language, and the most exaggerated politeness will leave him totally unmoved. Even if one places a cord around his neck, and tries to haul him across the bridge, a friend meanwhile prodding him from behind with a stick, the great beast will in all probability refuse to do what is required (for the language of physical force is a dead language to him, be it shouted never so loudly), preferring as an alternative to charge his puny tormentors, and trample them under his feet. But there is one weak spot in the pachyderm's composition, of which his crafty keeper is not slow to make use. He obeys, if not his master, the cravings of his own stomach. The indulgence of appetite establishes a cosmopolitan language, if I may be allowed to call it so, which every animal comprehends. Hold a handful of food to his nose and he will follow wherever you lead him. So it is, at least, with the rhinoceros. Only do this, and all other forms of polite persuasion become superfluous and unnecessary.2

As any experienced elephant trainer will attest, this animal, while potentially very dangerous to work with, can also be a remarkably

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compliant beast. Even when it is in a docile mood, however, the sheer size and power of an elephant pose a special problem for anyone seeking its co-operation. Indeed, in order to reduce the risk to self and others to an acceptable minimum, the trainer of an elephant in captivity must develop a sympathetic understanding of the animal. A degree of mutual trust must be established between animal and trainer, such that the trainer's behaviour is as predictable to the elephant as the elephant's is to the trainer. A high degree of skill, tact, and sensitivity is required, and the training of an elephant involves not so much the imposition of discipline by the trainer on the animal as co-operative acceptance by them both of the need for disciplined behaviour and mutual respect. Since such a relationship typically does not corne naturally to either, it is usually best achieved through a judicious blend of techniques which include persuasion, rewards, and sanctions. In many respects, the regulation of a financial market such as a stock exchange poses similar problems. While financial markets are not, of course, live animals in the same way that elephants are, they are nevertheless characterized this way by those who operate in them. The market itself, as well as its players, is said to be 'behaving' in a 'bullish' or 'bearish' way. Not only is predictability thus a critical factor in dealing in (or attempting to regulate) a financial market, but so are power and trust. As very recent events throughout the 'Western' world have vividly attested, a financial market can, like an elephant, go out of control very quickly, with devastating results. It is no coincidence that analysts speak of market 'forces,' for financial markets, operating as they do at the very heart of capitalist economies, are the locus of enormous economic and political power. In this environment, even slight and unintended miscalculations can produce disastrous consequences for innocent bystanders and unsuspecting players. The mystique that surrounds the notion of 'market forces' was nicely captured recently by a Canadian newspaper columnist in his description of reactions in the Far East to the 'Crash of'87': The [television] announcers noted that vast quantities of money had been wiped out in Hong Kong that day. The reasons were unclear. It had something to do with things called market forces. These market forces had simply thrust their way into Hong Kong and demolished money

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Securing Compliance belonging to a group of people known as investors. Apparently no one could stop the market forces. The cameras caught investors pushing and shoving as they tried to escape the forces. But to no avail. Market forces are apparently very strong - rather like death rays. Or perhaps killer bees. ... Remembering the time - just a few years earlier - when these same market forces had been pronounced the hope for Canada's future, we sipped our Scotch and marvelled. ... The announcers turned to other news ... We pondered the nature of these market forces. What were they? Where did they come from? Could they be stopped?3

Of course, not only is the market as a whole a powerful entity to try to regulate, but so are many of the corporate (and even individual) players in it. Referring to one of the member firms within his jurisdiction, a compliance officer within the stock exchange we have been studying told us: co: If you look at the make-up of [this firm], you're talking about the most powerful men in [the province]. Int: In the financial community? co: Just in [the province] generally, not only in the financial community, but you know they have a great deal of power.

In our research, we have been examining the dynamics of the regulation of a major financial market, a large North American stock exchange. In this paper, our principal interest is in two aspects of this regulation: the respective roles of public and private authorities in carrying out regulation, and the particular approaches and techniques that each type adopts in its attempts to do regulation. In undertaking our research, we were, of course, aware that we are by no means the first to have attempted to study the regulation of financial markets. Recent years, in fact, have evidenced a growing interest in such studies, especially in the United States,4 Britain,5 Australia,6 and Canada.7 We were struck, however, by the fact that virtually all of this research interest has focused on 'public' regulators, such as securities commissions, and particularly on their investigative and prosecutorial activities. Yet regulation of financial markets has by no means been the

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exclusive preserve of public governmental agencies. In particular, organized stock markets and other associations of investment dealers have played a major (often leading) role in the regulation and disciplining of their members. Our central concern, therefore, has been to identify the differences and similarities between 'public' and 'private' regulation in this area and to explore the relationship between the two. Specifically, we set out to try to answer a number of critical questions about the nature of public and private regulation. Do public and private regulators differ over the nature of regulation? And if so, how do these conceptions differ? In undertaking regulation, are public and private authorities pursuing similar or divergent objectives? How, and on what basis, is the 'regulatory pie' divided up between public and private authorities? How do the resources at the disposal of public and private regulators vary, and how do such differences affect the way these authorities regulate? Are some strategies more likely to be adopted by one kind of regulator than another? And if so, why? Are public and private regulatory regimes in some sense (as Henry8 has recently suggested) 'mutually constitutive' of one another? And if so, what are the mechanisms through which such mutual relations are established and maintained? And, finally, to what extent, and in what ways, does the nature of the enterprise involved constrain or facilitate the efforts of public and private regulators? In this paper, we do not propose to address all, or even most, of these questions. Rather, we shall focus on two aspects of public and private regulation that we have observed and discuss their implications for research on regulation more generally: first, the conceptions of order that underlie the regulatory practices of public and private authorities, and, second, the implications of these conceptions for the kinds of regulatory strategies adopted. We are not suggesting that the features of regulation examined in this paper are a magical key to unlock the secrets of regulation. On the contrary, our research acknowledges (and proceeds on the assumption) that the phenomenon of regulation can be properly understood only by taking into account a whole range of contingent factors. In regulation of a stock market these include influences on the distribution of regulatory activity between public and private regulators (such as resources for regulation, institutional self-interest, and factors of convenience and opportunity) and more general 'external' influences (such as the

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political environment, judicial influence, the occurrence of 'scandal,' the personalities of key regulatory players, and particular features of the regulated industry itself (e.g. internationalization) that impinge on regulation. We have focused on conceptions of order because we believe that this aspect has been unduly neglected in studies of regulation in this and other areas, but is critical to understanding this phenomenon. Some Conventional Wisdom In his influential book Knowledge and Politics, Roberto Unger draws an important distinction between what he calls 'legal (or formal) justice' and 'substantive justice': To understand the nature of adjudication one must distinguish two different ways of ordering human relations. One way is to establish rules to govern general categories of acts and persons, and then to decide particular disputes among persons on the basis of the established rules. This is legal justice. The other way is to determine goals and then, quite independently of rules, to decide particular cases by a judgment of what decision is most likely to contribute to the predetermined goals, a judgment of instrumental rationality. This is substantive justice.9

In contrasting these two modes of ordering, Unger draws on psychological analogies: 'Legal justice is the political equivalent to the morality of reason and substantive justice the political equivalent of the morality of desire. Like the morality of reason, formal justice uses rules as an immediate standard of justification. Like the morality of desire, substantive justice uses ends.'10 He concludes that 'formal and substantive justice cannot be reconciled.'11 Virtually all the literature on regulation, to the extent that it addresses the issue, begins with the assumption that it is an attempt to impose 'formal' or 'legal' justice. Regulation is defined, if at all, as the enforcement of (or at least the securing of compliance with) a set of prescriptive rules.12 When regulators are unable to (or simply do not) demonstrate that the behaviour of regulatees complies with these rules, regulation is said to have 'failed,' a result explained commonly by the claim that the regulators have been 'captured.'13

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In this vein, regulation is presented as something imposed externally on regulatees (most commonly by state agents in the 'public interest') and naturally resisted, either by subversion or by avoidance. Selfregulation, to the extent that it is acknowledged as real at all (rather than a clever illusion), is explained primarily as a technique of avoidance of state regulation. Thus the process of regulation is conceived as a species of 'dialectic' that 'treats the political processes of regulation and the economic processes of regulatee avoidance as opposing forces ... simultaneously resolving and renewing an endless series.'14 Our own research on the regulation of a large stock market suggests to us that this conventional conceptual framework is inadequate in a number of ways. Not least of these is the implicit assumption that the objectives of regulators and regulatees, as far as regulation is concerned, are inherently in conflict and that any appearance to the contrary is a sure sign of successful subversion or avoidance by the regulatees. Our starting point, therefore, in reconsidering this conventional wisdom will be objectives in a situation in which both public and private authorities are engaged in regulatory activities. Before doing so, however, we shall briefly describe the two regulatory bodies we have been studying and the nature of our research. The Research Setting Our research has been undertaken within a major North American stock exchange and a state-run securities commission. A brief description of these two institutions, and of their location within the wider financial market, will place in context the enterprise of regulation, in which they both participate. The Stock Exchange Founded in the mid-nineteenth century, the stock exchange is now one of the largest in North America. In its early years, its principal business derived from what in the securities industry are referred to as 'junior mining and resource companies.' This reflected the local economy's heavy reliance on these industries. In more recent decades, however, the market in this jurisdiction has 'matured,' so that now the exchange deals to a considerable extent in 'blue chip' and other industrial stocks. The

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'junior resource' industries nevertheless still play a significant role in the local economy and hence in the affairs of the exchange. The exchange consists of approximately ninety member firms in the investment and brokerage business, each of which holds at least one 'seat.' Although it is a private, non-profit organization, the exchange is incorporated under a statute of the local legislature which, among other things, requires the exchange to be operated in conformity with local securities legislation. The exchange is governed by a board of governors, consisting of the appointed president of the exchange, ten member governors, and two non-member 'public' governors. It employs a staff of approximately 450. The principal business of the exchange consists in the trading of equities (common and preferred shares, rights, warrants, and listed options). An average of 30 million shares (with a value of just under $424 million) are traded on the exchange's floor each day. This represents approximately 75 per cent of the dollar-value and 43 per cent of the share volume of all shares traded on stock exchanges in the country in which the exchange operates. While the exchange thus represents a major player in the financial market, it is, of course, only one part of it. Bonds and other debt instruments are not listed on the exchange, and in addition to the equities listed by the exchange there is a significant unlisted 'over-the-counter' equities market. In addition there is the 'money market,' in which a wide variety of short-term financial obligations (such as government treasury bills, commercial paper, bankers' acceptances, and trust company guaranteed investment certificates) are bought and sold. 'Futures' (commitments to purchase commodities at some future time) are traded on a separate futures exchange (which is also run by the stock exchange). Most of the exchange's members are involved in one way or another in all these different elements of the financial market. However, stock exchanges constitute but one part of a much wider financial market. In 1984, for instance, the dollar value of trading on the country's stock exchanges was over $36 billion. By contrast, it was estimated that over $728 billion in bond and money market securities traded on the over-the-counter market in the same year. Nevertheless, stock markets account for the great majority of equities trading in the country and have a high public profile and symbolic significance as a result.

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To provide the rules and procedures for its operation, the exchange has a general by-law, enacted by its board of governors. The by-law covers a whole range of matters, from conditions of membership of the exchange to the terms under which companies can have their equities 'listed' for trading and detailed procedures for trading. The by-law also details members' responsibilities to the investing public, to each other, and to the exchange itself and establishes disciplinary institutions and procedures through which the exchange can deal with alleged breaches of these responsibilities by its members or their employees, including various sanctions that can be imposed on those adjudged to have breached provisions of the by-law. To enforce the by-law and secure continuing compliance, the exchange maintains a substantial staff. Responsibility for this policing is divided among three separate but related parts of the organization. Each part polices one area - market surveillance: trading on the floor; listings: listed companies; and member regulation: member brokers. Within this last area, functional divisions are maintained between audits, compliance review, investigations, and disciplinary hearings. To pursue these self-regulatory functions, the exchange allocates a staff of approximately ninety members and a budget of approximately $4.5 million, or approximately 15 per cent of its total budget. The Securities Commission Although established in the early 19308, in the wake of the financial disasters of 1929, the securities commission began only in the mid-1960s, following a major scandal in the financial market, to play a substantial role in regulating financial markets. Founded by legislation (the Securities Act), the commission has been given regulatory jurisdiction over a wide range of financial matters. It has administrative responsibility for five separate statutes dealing with various aspects of the financial market and partial responsibility for two more. It is through the Securities Act, however, that it derives its regulatory jurisdiction over the exchange. The act provides that no stock exchange can carry on business in the jurisdiction unless it is 'recognized in writing' by the commission. The exchange is the only stock exchange recognized by the commission under this provision. The commission is given wide powers of decision with respect to

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practically every significant aspect of the exchange's operation, including reviewing and approving (or disallowing) provisions of the exchange's by-law and hearing and determining appeals from any person or company 'directly affected' by any decision of the exchange made under any of its by-laws, rules, or regulations. Such regulatory decisions of the commission are required to be made only 'where it appears to it [the Commission] to be in the public interest.' The exchange constitutes only one object (albeit an important one) of the commission's regulatory jurisdiction. The commission's mandate extends to the regulation of the buying and selling of all 'securities' not only the 'listed' exchange equities market but also the 'unlisted' over-the-counter equities market, the huge bond and money markets, and the futures market. The commission exercises its regulatory authority through ten principal functions: (i) registration of securities firms and their employees directly selling securities or providing other investment services (e.g. advice, portfolio management) to the public; (2) requiring public disclosure, by those who issue securities for public purchase, of all 'material' facts concerning the securities, their issuers, and others associated with their distribution to the public (e.g. promoters, underwriters); (3) market surveillance, to detect trading patterns that suggest unlawful or improper (from the point of view of the 'public interest') trading practices or market manipulation; (4) review and approval or disapproval of the exchange's by-laws, rules, and regulations; (5) investigation and, where appropriate, disciplinary hearings and / or prosecutions concerning alleged violations of the Securities Act or the regulations passed pursuant to it; (6) promulgation of official policies of the commission concerning securities issuance and trading, shareholder rights, corporate take-overs and mergers, and so on; (7) appeals from decisions of the commission's staff or of the various self-regulatory organizations within its jurisdiction; (8) public hearings before the commission promulgates official policies or exercises its more drastic regulatory powers; (9) referrals of cases (e.g. to other government regulatory bodies or, in the case of criminal violations, the police and prosecutorial authorities) when the commission feels that detected irregularities lie more clearly within the jurisdiction of such other agencies; and (10) public education (although the commission acknowledges that few of its resources are devoted to this function).

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Both registration and disclosure functions include significant authority to grant major exemptions from the statutory requirements. These exemptions are of considerable significance in defining the practical scope of the commission's regulatory activities. The commission consists of a full-time chairman and vice-chairman and seven part-time members. Its membership has in recent years been structured to include at least one of each of the following: a securities law practitioner, an accountant, a person with a background in resource engineering, a business person (usually with experience in the securities industry), someone with experience in the commodities market, and an investor. Attached to the commission are three special advisers (on law, policy, and accounting). While several of the more substantial regulatory measures available to it under the Securities Act are exercizable only by the commission itself (e.g. imposition of a 'cease trading' order and the holding of public hearings), the majority of the regulatory powers are exercisable by the director of the commission (who is its chief administrative officer) or one of his or her subordinates. While some powers are given directly to the director (e.g. to issue receipts for prospectuses), others may be delegated to him or her by the commission (e.g. its formal powers of investigation). To assist it in performing regulatory functions, the commission has a staff of approximately 150, headed by the director. The senior levels of this staff are predominantly lawyers and people with backgrounds in business and / or accounting. The investigative staff consists primarily of former police officers and people with experience in similar government enforcement branches (e.g. from the Revenue Department). Significant in the relationship between commission and exchange regulators has been the interchange of personnel over the years. Many key members of the commission's staff (e.g. the director, the senior investigator, and the person in charge of market surveillance) were formerly employed in regulatory positions at the exchange. Similarly, the head of the exchange's department for member regulation is a former part-time member of the commission, and the current chairman of the commission has served on the exchange's board of governors. This interchange, when combined with former ties of many commission members and staff members with the securities industry and the securities bar - most of the commission's lawyers are drawn from, and many are seconded from, this source on a short- or long-term basis -

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ensures that regulatory relations in this area are considerably shaped by personal acquaintance and familiarity. The commission is administratively located within a government ministry, whose minister is politically responsible for it. Because it is a creature of statute, however, the commission enjoys, both legally and in practice, considerable independence from direct political and bureaucratic supervision and control in its day-to-day operations, the main opportunity for such oversight being approval of its annual budget (currently about $7 million). The Division of Regulatory Labour Although, as we have noted, the commission has, by virtue of the Securities Act, extensive, direct regulatory authority over the exchange, the exercise of much of this authority has in fact been delegated to the exchange. This delegation includes: screening of member firms and their employees; investigation and disposition (through disciplinary hearings or otherwise) of almost all complaints against, and other suspected violations by, exchange members and their employees; conduct of virtually all financial and other compliance audits and reviews of member firms; market surveillance; and review of a very limited class of corporate prospectuses of issuers wishing to make an initial public share-offering through the facilities of the exchange. This delegation of authority leaves the commission with little to do in practice by way of direct regulation of the exchange. In registration, the exchange grants provisional approval and the commission has ninety days in which to register or turn down an applicant if it has any concerns. In practice, the commission simply runs the applicant's name through its computerized files and orders a criminal record check. If nothing objectionable turns up from these summary checks, the exchange's initial approval is automatically confirmed. We were informed that it is 'very rare' for an exchange approval to be turned back as a result of this veto power. The commission retains the function of reviewing proposed amendments to the exchange's by-law, but a good part of this oversight function has now been put on a veto basis. In submitting by-law amendments to the commission, the exchange indicates whether, in its

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view, the amendment involves the public interest or is simply a 'house-keeping' matter. In the case of 'house-keeping' amendments (which constitute the majority), the amendment is considered approved unless the commission objects. In 'public interest' amendments, the exchange must receive formal notification from the commission that it does not have any objections before such amendments can come into force. Amendments involving major policy matters (such as unfixing of commission rates) are, rarely, the subject of formal public hearings by the commission. Very occasionally, complaints and other allegations of wrongdoing that have come to the exchange's attention are referred back to the commission for investigation. We also noted one case in which an allegation against an exchange member firm had surfaced during the course of a much wider commission investigation into matters not involving the exchange or its members. In this case, the commission pursued the investigation of the exchange member rather than passing it on to the exchange. Commission investigations of exchange members or their employees, however, are very exceptional. Review of prospectuses, then, remains the main (and indirect) way in which the commission's regulatory activity impinges upon the operation of the exchange. With the limited class of prospectuses for which the commission's review authority has in effect been delegated to the exchange, an operating agreement provides that the commission retains some residual veto with respect to approval of the prospectus: specifically, the issuer, any underwriter of the issue, and the directors, officers, and promoters of the issuer must 'pass' police records checks and checks of the commission's records; and the preliminary and final receipts for the prospectus (without which no distribution can legally be made) are still issued by the commission's staff, which can still refuse to do so if issuance does not seem in the public interest. The commission can substantially impinge on the exchange's operation also through imposition of a 'cease trading' order concerning particular shares. Exercise of this broad power is authorized by the Securities Act whenever, in the commission's opinion, 'such action is in the public interest.' The self-regulation that the exchange does is not limited to those regulatory functions delegated from the commission. Indeed, many regulatory functions currently 'delegated' to the exchange by the

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Securities Act or the commission could be expected to have been performed by the exchange even without such delegation, and some were in fact undertaken by the exchange prior to such formal delegation. Pursuant to its own by-law and internal policies, the exchange imposes (and enforces) a host of standards and procedures on its members that are not required of it by the Securities Act or by the commission. The 'know your client' rule provides an important example of such 'voluntary' self-regulation. According to this rule, registered representatives of member firms are required to assess the investment needs and capacities of each of their clients and ensure that any investment dealings they make are 'suitable' to their clients' needs and capacities. This rule is enforced through audits of client accounts performed by the exchange's compliance officers and, if necessary, through disciplinary proceedings brought against offenders by the exchange. Other examples of voluntary self-regulation can be found in listing requirements (more demanding than the commission's prospectus requirements) for companies wishing to have their stocks listed on the exchange and the capital and margin rules that it imposes on its members (which are not required by the registration process administered by the exchange on behalf of the commission). The Research Our research involved a combination of interviews, documentary analysis, and field observation in both institutions, over a period of three years. Considerably less time (six months) was spent at the commission than at the exchange (thirty months). In each case, however, our method followed a similar pattern. Senior personnel within each regulatory branch were interviewed in order to gain an overview of their conceptions and perceptions of the regulatory process. Simultaneously, basic documentation (the by-law and procedural manuals at the exchange, the Securities Act and regulations, and official policies and written decisions at the commission) was reviewed to gain an understanding of the formal legal framework within which regulation is undertaken. We then examined samples of individual case files to learn about detailed mechanics of regulation. The basis for sampling varied from one branch to another, but our aim was always to review a sample that

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would most accurately reflect the variety of 'cases' with which the regulator deals, rather than seeking quantitative randomness. The individual files were then discussed at considerable length with the officers who had been responsible for them, in order for us to gain further elaboration of the issues raised by the file and the procedures followed, as well as to gather data not available from the files themselves. We were provided with some office space in both institutions, and this gave us considerable opportunity to observe operations at first hand. A substantial amount of time was spent in this way, and extensive field notes were written, especially in market surveillance, where regulation is a continuous activity not so clearly defined by files and individual 'cases.' Finally, we spent time on the floor of the exchange, observing at first hand both the trading process and the regulatory work of floor officials. To provide some comparative perspective, interviews and observations were carried out at two other major North American stock exchanges during the period of the study. The Objectives of Regulation One of the most obvious questions to be asked of institutions such as the exchange and the commission is: why regulate? It is a question that can mean different things. On one level it seeks to elicit the objectives sought through regulation. On another, given acceptance that regulation could be a way of achieving such objectives, it seeks to explain what interest a particular organization has in devoting part of its resources to the activity of regulation. In the context of the exchange, in which both the commission and the exchange are actively involved in regulation, the question is pertinent in both its forms. We need to know what regulation is thought to achieve and why each organization chooses to do it (rather than, say, simply leaving it to the other to do). The answers, of course, are related. In the evolution of a regulatory scheme, objectives emerge in various guises. Legislators often have a number of objectives in mind, which may or may not be explicitly articulated in debate. In due course these are negotiated into the agreed language of legislation, typically quite abstractly. For public regulators, such as the commission, which owe

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their existence to legislation, the general terms of the legislation become the frame of reference within which their activities must be justified. The language of legislation, however, is typically not specific enough to provide functional guides for regulatory behaviour. So the regulator begins to break out the general language of the law into more useful, more specific objectives. These applied interpretations then provide the working models in terms of which regulatory behaviour can be planned, presented, justified, and perhaps even evaluated. The regulator is not a singular entity in this context. While regulatory bodies such as the commission often seek to develop 'official' positions concerning regulatory objectives, the vague nature of such objectives, combined with their multiplicity and potential contradictoriness, ensures plenty of room for further interpretations and shifts of emphasis on the part of line officials, who must implement them in particular cases. In seeking to discover the objectives that regulators seek, therefore, one is presented not with a neat, coherent set of undisputed ends but rather a cluster of more or less agreed objectives which can be, and are, presented in different combinations, and with different emphases, by participants in the regulatory enterprise. The fluidity of objectives is highly functional for regulators: it provides enormous flexibility for action (since there will rarely be an action that cannot be justified in terms of some agreed regulatory objective), and it permits accountability to be confined largely to procedural rather than substantive terms (since there is always room for debate as to whether a particular objective has been met or should even be regarded as paramount). The vulnerability of a regulatory agency to criticism is thus effectively limited to a debate about whether its actions have been legal (or procedurally correct), rather than whether they have been 'right.' But the fluidity of objectives is also functional for the regulated. Most important, it allows the regulated to endorse the objectives of the regulator, while meaning something quite different. This in turn allows the influence that the regulated exerts on the regulator to be kept invisible; the regulator can loudly proclaim adherence to principles while copiously accommodating the demands of the regulated. Finally, it facilitates the presentation of issues of principle as purely matters of technique. 'Objectives' are thus the ideological oil for the regulatory machine. Our study provides ample evidence of this.

IO3 Controlling Interests

There is remarkably little overt disagreement between regulators, both at the commission and at the exchange, about the objectives of regulation. Objectives are largely implicit rather than explicit in the Securities Act, which provides the official framework within which the exchange is regulated, both by the commission and by itself. Indeed, the only clear reference in the statute to the objectives of the regulation of securities is the requirement that certain regulatory decisions are to be made where they appear to the commission to be in the public interest. It has thus been left to regulators (with occasional murmurings from the courts) to translate 'the public interest' into a rather more specific set of objectives. An interesting subset of objectives has emerged in the discourse of regulators, both at the commission and at the exchange. There is virtually undisputed agreement in both sectors that a major aspect of 'the public interest' is the protection of investors from unfair, crooked, and incompetent practices by industry participants. Such practices include misrepresentation, insider trading, market manipulation, fraud, and outright theft and conversion, as well as financial mismanagement that is likely to lead to insolvency. It is equally recognized, however, that there is no point in protecting investors if, in doing so, the effectiveness of the market is undermined. Maintenance of an effective market, it is argued, is in the interests not only of the investor but also of the public more generally. For the investor, the critical factor is to have a market in which to invest with a reasonable prospect of turning a profit. For the more general public interest, an effective market provides the essential prerequisite for capital formation and hence economic growth and well-being. Regulation, according to this view, is to maintain a market that is both fair and effective, or, to use the terminology more favoured by industry participants, a market that displays both equity and liquidity. The demands of equity and liquidity, while both essential for a functioning market, may conflict. Too many restrictions on what may be brought to market and how it may be sold - restrictions that may be thought necessary to ensure equity - may unduly reduce the liquidity of the market (not to mention its competitiveness with other markets) and thereby unduly restrict the opportunity available to investors to make profitable investments. What begins as an attempt to protect investors ends by harming them. A vivid example of this kind of dilemma was given to us by one of the commission's staff members. It concerned the rules concerning shares

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in escrow. Under these rules, directors and officers of a company making a public share offering may hold some of the shares themselves but may not trade them until a number of shares have been sold to the public that meets a particular ratio. The rules are designed to protect investors by ensuring them a fair opportunity, vis-a-vis corporate insiders, to profit from investment in a company. When shares of the Apple Computer Co. were issued on competing North American exchanges, the share issue did not conform to our commission's escrow rules: corporate insiders would have been able to secure a disproportionate share of the profits from a successful issue. Because of this, the Apple shares could not have been listed on the exchange, thus denying to exchange participants the opportunity to participate in this corporate venture. As it turned out, however, Apple shares were some of the most profitable ever issued. While insiders secured a disproportionate share of the profits (according to the rules of our commission), the investment proved very profitable indeed for non-insider investors who participated. Thus the escrow rules, designed to protect the investor, in this case would have prevented him or her from participating in a very profitable investment opportunity. This example demonstrates, first, that achieving the objectives of regulation in this area will often involve striking a balance between equity and liquidity, and, second, that embedded in the concept of equity are value judgments about what constitutes an acceptable risk for investors to take. That there should be so little overt disagreement between public and private regulators over the objectives of regulation should cause no surprise, given this elasticity in the meaning of the agreed objectives. Indeed, the members of the exchange, as a collectivity, would have a very strong vested interest in maintaining a market that is both fair and effective, for these are the very conditions necessary to attract both issuers and investors. In a world in which markets such as the exchange must increasingly compete both nationally and internationally for business, pursuit of these objectives through some form of regulation makes perfect sense. Underlying all of this thinking, of course, is an essential faith in capitalism as a system based on free enterprise and opportunity. Such basic faith, not surprisingly, appears to be accepted as a given by regulators in both sectors. Indeed it would be hard to imagine how one

Ios Controlling Interests could seriously entertain the idea of regulating a stock market without it; the very concept of a stock market epitomizes the capitalist ethic. What emerges clearly from our research, then, is that the real area of struggle between public and private regulators in the securities field is not over what regulatory objectives are, but over what they mean, and how they are to be implemented. The Meaning of Equity: 'Disclosure' v. 'Merit' As we have noted, the concept of equity (or fairness) is identified by regulators as central to the objective of protecting investors. Yet what this concept implies for regulation, both generally and in specific regulatory decisions, is the subject of much disagreement. Basically two views of this concept compete: one defines it in essentially formal, procedural terms, while the other focuses on more substantive concerns. They represent two quite distinctive approaches to investor protection, through regulation. The proceduralists would have it that the sole conditions for equity in the market-place are full, frank, and timely disclosure of all 'material' facts about the product that is for sale (including relevant facts about those who are involved in selling it - e.g. that they are 'insiders' or that they have or have not got something in their personal history which might lead one to doubt their trustworthiness). Equity in this sense means no more nor less than ensuring that the game is being played on a 'level playing field' and that investors can invest 'with their eyes open.' There may still, or course, be disagreements about what degree of disclosure is necessary to satisfy the demands of equity, but the proceduralists believe that disclosure alone satisfies such demands. As one regulator put it to us: 'If you want to sell rotten eggs, that's fine, so long as you tell the public that they're rotten.' The alternative view of equity focuses not simply on disclosure but also on the 'merit' of a product (or a selling tactic). This attitude to regulation - sometimes referred to as the 'blue sky' approach, apparently because its original proponents in Kansas were concerned to prevent wily salesmen from trying to sell a fee simple in the blue sky to gullible farmers - proceeds from the assumption that certain products or means of selling them are simply too risky (and therefore too potentially dangerous for the investor) to be permitted. It represents a

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paternalistic philosophy of regulation: investors must be protected not simply from issuers and their salespeople but also from themselves. According to its proponents, people should not be permitted to sell rotten eggs, however honest they are about them, in the absence of some evidence that there is some 'legitimate' market for them. The proceduralist detractors of the 'blue sky' philosophy not surprisingly argue that such 'merit' regulation strikes an inappropriate balance between equity and liquidity in the market-place. Given full disclosure, the market itself should be trusted to squeeze out those products for which there is no legitimate market (and those who try to sell them), and merit regulation eliminates some of the risk-taking essential for the liquidity required to keep the market viable, effective, and competitive. In this way, detractors argue, 'merit' regulation is likely to be contrary to the interests of the public and of market participants. These, of course, are ideal positions, and at the commission and the exchange we did not find purists on either side. All those to whom we spoke recognized that regulation requires some blend of 'disclosure' and 'merit.' Beyond this, however, we found little agreement, either among regulators within each institution or between the two, as to the most appropriate mix and how it should be reflected in regulatory policies and decisions. These disagreements, of course, reflect differences of opinion not only as to what constitutes adequate equity for the purposes of the public interest but also about what constitutes adequate liquidity. It is to this concept, then, that we turn next. Policing Liquidity Liquidity is said to be the hallmark of a good stock market. Although its measurement is a rather esoteric matter, the concept refers to the degree of flexibility available to investors in the market. A security is said to be liquid if there is ample opportunity to trade it; this requires an active market in the shares and an absence of restrictions on trading them. Since the object of a stock market is to provide a forum in which capital can be raised and moved around to the people who indicate the greatest demand for it, liquidity is regarded as essential to efficient capital formation, enhancement, and mobility.

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Liquidity and equity are by no means always competing objectives. Many inequitable market practices also tend to impair liquidity. Stock manipulation provides an obvious example: to at least one body of opinion, it 'distorts' the market to the detriment of the majority of shareholders. While lay judgments about equity might be thought to be as good as professional ones, or legal judgments as good as business ones, this is not so for liquidity. Accurate assessment of the liquidity of a market requires considerable expertise and experience and these days is accomplished with the aid of quite sophisticated computer technology. Not surprisingly, therefore, liquidity is a subject on which the commission is inclined to listen very attentively to (if not actually defer to) the judgments of the exchange. In the old days, the liquidity of a market could be judged largely by looking at the market itself, but this is no longer the case. In an increasingly international financial market, in which individual stock exchanges are competing with each other for issuers' and investors' business, competitiveness affects a market's liquidity. This is another reason why the principal expertise in this area is regarded as residing with the exchange rather than the commission, since the exchange's members are in closest and most continuous contact with the international market. These qualities of liquidity significantly affect regulation. It is no coincidence that industry participants refer to a market with good liquidity as an 'orderly market.' For those directly involved in the market, the order sought through regulation is defined not in terms of rules but in terms of the 'behaviour' of the market itself. The principal function through which liquidity is monitored and regulated, then, is market surveillance. This is achieved through computer scanning and analysis of all trades executed on the floor. Computer profiles of normal trading variability are established and used to detect unusual trading patterns in a given stock. These 'kick-outs' then provide the occasion for investigations and, if necessary, remedial actions, such as halt trading orders.15 Implicit in this mode of regulation is a conception of order quite different from that implicit in the traditional legal model of regulation, in which order is defined first and foremost as the adherence to rules. In the next section, therefore, we seek to elaborate more fully these two

io8 Securing Compliance conceptions of order, which animate regulation of the stock exchange we have been studying. Two Conceptions of Order The two conceptions of order we have identified at the exchange bear a striking resemblance to the two conceptions of 'justice' ('substantive' and 'formal / legal') suggested by Unger. For reasons that will become apparent, however, we prefer to call them 'behavioural' and 'symbolic' order respectively. (Elsewhere16 we have characterized them as 'instrumental' and 'moral' order.) They give rise to two quite different modes of regulation. On the one hand, order is defined by the market itself: an orderly market is one that is functioning with optimum liquidity and equity, and there are various ways of measuring the extent to which a market is functioning at maximum 'efficiency' in this regard. Order is defined in terms of a relational state of affairs, a set of desired and observable behaviours. In pursuing this conception of order, rules may be seen as useful guides in defining the conditions under which order will prevail in the market, but they perform no more than a secondary role in this regard. Furthermore, the rules that inform this conception of order tend to be what Unger17 has termed 'constitutive' or 'technical,' rather than 'prescriptive.' It is the market, however, that defines the desired order, rather than the rules. If following the rules does not produce order, then too bad for the rules. They were obviously the wrong rules and should be ignored or changed. For want of a better term, we call this conception of order 'behaviouralist.' For the regulator who is concerned primarily with 'behavioural' order, the main task is twofold: to prevent disorder (primarily through maintaining conditions that will provide the least opportunity for disorder); and to restore order as quickly as possible once it has occurred. To the behaviouralist regulator, there is nothing moral or punitive in what he or she is doing: the need for order is a fundamental condition of a viable market, and regulatory activities to achieve it are purely instrumental in character. For regulation to be justified under this conception of order, a demonstrable connection between intervention and behavioural change must exist.

ICQ Controlling Interests The other conception of order is what we will call a 'symbolic' one. In this conception, order is defined in terms of rules; disorder is defined in terms of breaches of rules. The main task of the 'symbolic' regulator is to enforce rules, principally through detecting violations of the rules, and violators, and sanctioning them. Since the essence of 'symbolic' order is adherence to the rules, procedural rules are regarded as almost as important (or even as important) as substantive rules. In the pursuit of 'symbolic' order, therefore, adherence to standards of the procedural rules is a major concern. 'Symbolic' regulators are concerned primarily with 'offences' and 'offenders.' There is a strong moral element to all of this, and people who unintentionally or accidentally breach the rules are not generally treated as 'offenders' and sanctioned. The 'offence,' however, consists in breaking the rules, and the behavioural consequences of the breach are of secondary importance. Indeed, the fact that there have been no perceptible behavioural consequences of a breach, while it may provide the basis for a discretionary decision not to sanction the breach, or operate as a mitigating factor in the choice of sanctions, does not detract from the character of the breach as an 'offence,' a violation of 'symbolic' order. Nor are behavioural consequences necessarily determinative of what sanction is chosen - at least not directly. While likely behavioural consequences are often in the minds of 'symbolic' regulators when they choose sanctions, sanctions are also often imposed simply because they are thought to be 'deserved' by the offender, regardless of whether there is any real expectation that they will achieve behavioural objectives. In its purest form, 'symbolic' regulation is aimed first and foremost at achieving moral rather than behavioural order. In making this distinction between 'behavioural' and 'symbolic' conceptions of order, we do not, of course, mean to suggest that they are entirely discrete and unrelated. The establishment of 'symbolic' order among the members of the community being regulated will usually be a very important element in creating the conditions under which 'behavioural' order can be maintained, and the wise regulator will seek a judicious articulation of the two conceptions of order in his or her regulatory practices. But the two conceptions of order have very different implications for the way regulation is undertaken, for the way regulatory resources are structured and deployed, for the strategies of

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regulation selected, and for the regulatory products generated. Regulation in any particular setting such as the exchange, then, is shaped by the way in which these two conceptions of order are articulated. We have encountered a great deal of evidence of the coexistence of these two conceptions of order in the regulation of the stock exchange we have been studying. The most striking examples are to be found within the exchange's self-regulatory activities. For instance, the market surveillance function, whose concerns are explicitly behavioural, is kept quite separate, both administratively and physically, from other regulatory functions at the exchange. Further, our interviews with those involved in this function provided evidence of a very strong resistance against the encroachment of lawyers and legal process into this regulatory function. It was felt that the legal model of regulation (what Unger would call 'legal' or 'formal' justice) is not simply inappropriate for regulation in this area, but actually detrimental to its effectiveness. Any attempt to introduce principles and practices of legality ('legalism') seemed to be regarded as fundamentally threatening to the market process. Recent constitutional amendments that apparently require adoption of a 'legal justice' model of regulation in many areas of public (and possibly also private) administration are of great concern to regulators in this area. While this rigid separation of market surveillance from other regulatory functions provides the most vivid illustration of a desire to distinguish between 'behavioural' and 'symbolic' ordering, it is not the only one. Even within the member regulation department (which includes audit, compliance, and investigation divisions), we detected markedly different approaches to regulation and an apparent reluctance to 'roll over' matters from one division to another. Although both the compliance officers and the investigators, for instance, were operating within the context of elaborate sets of rules (mainly those of the exchange by-law), their attitudes toward these rules appeared significantly different. To investigators, the formal rules define the order that they are seeking to enforce. For compliance officers, however, perceived exigencies of the 'street,' as much if not more than formal rules, define the order they seek compliance with from members. Their assessments of compliance are in terms as much of what is practical and 'realistic' as of whether practices are in strict conformity with formal rules.

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As we noted earlier, this kind of distinction is much less noticeable at the commission, the main activities of which appear to be oriented much more toward enforcement of formal rules. The conclusion that may be drawn suggests a subtle but important division of regulatory labour between the two institutions, with the commission focusing on symbolic ordering and the exchange on behavioural ordering. In crude terms, these two conceptions of order can be said to be associated with the professional groups involved in regulating the exchange - lawyers, on the one hand, and business people, economists, and accountants, on the other. Lawyers, by training and because of their patterns of thought, tend to focus on 'symbolic' ordering; the other professional groups tend to have a more natural interest in 'behavioural' order. Business people and market intermediaries in particular have a special interest in behavioural ordering, since they operate in the market being regulated. By the same token, crude distinctions can be drawn between regulators at the commission and at the exchange. The commission is dominated by lawyers, the exchange by businessmen. The exchange operates the market; the commission does not. The commission's regulatory mandate is defined almost exclusively by public law; the exchange's is not. These kinds of distinctions, while useful as indicators of the respective roles of the commission and the exchange in regulating this financial market, are obviously too simplistic. In reality, both regulatory bodies, and all the professional groups involved, reflect both conceptions of order in their philosophies and practices - not surprising, given the degree of personnel interchange. However, the articulation of the two conceptions varies in the regulatory practices of the two institutions and the professional groups. It is no coincidence, for instance, that half of the commission's staff members are employed in its 'Enforcement Branch,' which investigates alleged violations of the Securities Act and other laws, and that participation by seven of its nine commissioners focuses on commission hearings and appeals. As one senior member of the commission's staff commented to us: 'That is the traditional way of dividing up any securities commission ... I've been here twelve years, and it's always been that way.' By contrast, a relatively small proportion of the regulatory staff at the exchange is assigned to investigations and disciplinary hearings.

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Implications for Regulatory Strategy These two conceptions of order affect the choice of regulatory strategies and the kinds of regulatory products that they generate. 'Symbolic' order, being defined in terms of rules, violations, and enforcement, is achieved almost exclusively through the threat and application of sanctions. By contrast, 'behavioural' order, being defined in terms of a desired state of affairs, may be achieved through any number of strategies, including sanctions, threats, rewards, incentives, persuasion, design of facilities, and ideological manipulation, that might produce the desired result. Indeed, because of its supposed deterrent and didactive effects, purely 'symbolic' ordering may also sometimes help achieve behavioural order. This, in fact, is one of the principal justifications advanced for the pursuit of 'symbolic' order; abstract notions of 'justice' contribute a host of others. Most important, in terms of choice of regulatory strategies, some kind of sanction is essential for achieving 'symbolic' order, but not necessarily for 'behavioural' order. The regulator seeking the latter, therefore, has, in theory at least, a much wider range of regulatory strategies from which to choose. This fact is critical in situations, as at the exchange, where characteristics of the environment to be regulated make it difficult or impossible to employ sanctions effectively. We believe that three characteristics of the exchange's environment make it difficult to employ sanctions effectively: (i) the power of many of those whose conduct is to be regulated; (2) the speed with which regulation often has to be effected; and (3) the pressures that competition in financial markets (especially as a result of internationalization) exerts on regulators (regulatees often have ready access to alternative, less stringently regulated markets). These three factors help explain the commission's and the exchange's choices of regulatory strategies. First, they explain why 'behavioural' ordering is often preferred over 'symbolic' ordering by both sets of regulators and why, when 'symbolic' ordering is attempted, it is done only with great selectivity and not always with success. And second, they explain why, in pursuing 'behavioural' ordering, regulators tend to rely least on sanctions and most on persuasion, co-operation, compromise, integration of interests, and the minimum of conflict and resistance.

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These realities, and the strategies they dictate, were nicely captured by one of the exchange's compliance officers whom we interviewed: Don't forget one very important aspect here that we haven't really dwelt on and that is that a compliance officer is using to a large extent moral suasion in getting members to comply. We do not threaten them in any way. And that's where experience is very important in this particular job, because you can outline all the different types of consequences that could happen to a registered representative, a branch manager, a director of the board of directors of the firm, the firm itself if they allow this situation to continue because obviously we don't want to charge another firm for non-compliance if we can avoid it because it's very costly to start off the disciplinary process at the Exchange. We have to get our investigators involved, we have to have a slate of lawyers involved, plus committees, plus the board of governors. So a large measure of the success of all this is the degree of moral persuasions, moral suasion that we use at the time of the exit interview. In other words we get them to agree. We can't force them to agree, right? So you have to use the right arguments to get them to.

Our interviews with compliance officers at the exchange made it very clear that the 'right arguments' are almost always those that will demonstrate to non-compliant firms that continued non-compliance was not in their own business interests (or rather, that compliance was in their best interests). Like elephants and rhinoceri, securities firms, it seems, cannot easily be brow-beaten into compliance, but they can often be lured into it. Luring them - the task of compliance officers - requires skill and 'street sense.' Critics of securities regulators (including some academic writers on the subject) often confine their attention to regulators' efforts to effect 'symbolic' ordering. They readily conclude that because strategies like prosecution are seldom resorted to, and even more rarely successful, these agencies must be weak and ineffective. From our analysis so far, however, we believe, for two reasons, that such conclusions are based on a mistaken view of regulation and are probably wrong. First, such conclusions ignore or discount successes in achieving 'behavioural' order through the use of alternative regulatory strategies. Such strategies are typically not included within the research on which such findings are based.

H4 Securing Compliance Second, however, such conclusions reflect a misunderstanding of, or a failure to acknowledge, an essential difference between 'behavioural' and 'symbolic' ordering. To be most effective, behavioural ordering must often involve continuous processes of regulation, as in market surveillance. Only with continuous and unrelenting surveillance can the chances of preventing abuses, or detecting them and taking swift corrective action, be maximized. With 'symbolic' ordering, however, the opposite is true. Its effectiveness is usually enhanced by selectivity. By choosing the strongest cases and the symbolically most important 'targets,' prosecutors maximize the impact and effectiveness of this strategy. Far from being a sign of weakness, therefore, the relative rarity of prosecutions may be a sign of strength. The essential question for regulators, then, is: what is the most appropriate articulation of 'symbolic' and 'behavioural' ordering, given the environment to be regulated? Regulators' answers to this question will determine their regulatory strategies and products. Obviously, regulators' answers to this question are likely to differ, according to their relationship to the environment to be regulated and their seriousness about regulating effectively (as opposed to just appearing to do so). For those who would benefit from the absence of effective behavioural regulation, but who feel they need to be perceived to be regulating, for instance, more or less exclusive reliance on 'symbolic' regulation might seem very attractive. Public examples can be made of a carefully selected group of 'offenders,' providing the appearance of earnest regulation, while leaving the actual behavioural order more or less unaffected. For those who want an effectively regulated behavioural order, the reverse might be true; resources expended on 'symbolic' regulation might be regarded as wasted. To understand choices about strategies, therefore, we need to know what regulators' interests are, as well as what influences constrain and enhance their regulatory capacities. It is not sufficient to assume, as do so many state-centred theories of regulation, that regulatory practices are determined simply by a struggle between the willing regulators and the unwilling, resistant regulatees. We have suggested, throughout this chapter, a number of factors that might help explain why the commission and the exchange (a) adopt different articulations of 'behavioural' and 'symbolic' conceptions of order in their regulatory practices and (b) adopt the particular articula-

115 Controlling Interests

tions that they do. When fully elaborated, these explanations will provide insights as to why these two bodies adopt the strategies, and generate the regulatory products, that they do in their efforts to regulate (and appear to be regulating) the exchange. Conclusions Both public regulators and the private regulated securities industry have an interest in achieving a market at the exchange that is seen, by actual and potential investors at least, to be both fair and effective. The fact that unfairness and ineffectiveness can nowadays (especially with modern technology) be so easily made visible makes it unlikely that the perception of fairness and effectiveness will be maintained for long if it is not substantially reflected in the market's operation. With the growing internationalization of financial markets - which, largely as a result of technological developments, gives investors more and more ready access to alternative markets - the need for any market to appear to have 'integrity' is, if anything, becoming more crucial than ever. Loss of integrity invites loss of business, and loss of business invites disaster. Everybody knows, from the legends of 1929 and from much more recent events, what happens when disaster hits a stock exchange. Public authorities and the private securities industry itself, therefore, share a strong (and probably growing) interest in effective regulation. We have sought to lay out some of the necessary conditions for understanding regulation in this area. By way of conclusion, we would like to summarize the terms of the debate and the problems with existing conceptions of regulation that our analysis has sought to address. We have been engaged in a critique of the view of regulation that sees the state as the only significant guarantor of order and views regulation as a matter of the state finding the appropriate mix of sanctions to protect the public interest. Views of what this mix should be vary greatly, of course. Some advocate a total hands-off approach, on the grounds that the social activity in question is a cybernetic system that generates its own corrections without any need for regulation. Others advocate a heavily interventionist approach that involves detailed state oversight. Conventional socio-legal wisdom with respect to the regulation of social life is that sanctions are the essential, and indeed exclusive, levers in shaping order. The metaphor that grounds this view is distinctly

116 Securing Compliance

mechanical. Regulating human relations and the activity that it produces involve manipulating the levers of a socio-legal sanctioning machine so as to produce a desired result. The machine produces punishments and rewards which are at the disposal of the state. Within this framework, discussion centres around how and when the levers should be pulled best to affect action and how the machine can be modified so as to create better and more effective sanctions. To go back to the elephant with which we began (those readers who prefer can return to the rhinoceros), the conventional wisdom of socio-legal scholars can be compared with an inquiry into the training of elephants that concentrates on the little hooked stick that their trainers carry, and use occasionally to hook the elephants' earlobes and prod them on the neck as they move through complicated manoeuvres, while studiously ignoring all other features of elephant training, from the use of chains to restrict the elephants' movements to the tons of food employed to appeal to their tummies. Hooked sticks not only play a part in the training process but carry enormous symbolic significance, both for trainer and elephant, so that anyone who ignores them will misunderstand the training process. However, anyone who sought to describe the disciplining of this enormous and magnificent animal as if it were all accomplished through these little sticks would be guilty of the worst sort of myopia and would not only distort, but fundamentally misrepresent, elephant training. This is as true of bulls and bears as it is of elephants. We have attempted to show that while sanctions are essential to ordering financial markets, the mechanistic model that informs much scholarly thinking obscures and distorts rather than identifies and clarifies the processes of regulation. We have done so by arguing that the regulation of activity, such as that found in financial markets, is not simply, or primarily, a top-down mechanistic process, in which sanctions constitute the principle levers used to effect action, but rather an open-textured process of negotiation, compromise, and coercion, in which a variety of interests regulate and attempt to influence regulation. Regulation is not something done to a market by watchdogs, as the mechanistic model suggests, but is rather an integral feature of the market, undertaken by those involved in it. Regulation does not merely control a market, it constitutes it. Sanctions are only one of the strategies

117

Controlling Interests

used, in a variety of ways, to do different sorts of things, along with many other tactics, to create a market for the trading of securities. This argument constitutes a detailed elaboration of the position we have put forward in earlier work, namely, that regulation is best viewed not simply in terms of the application of sanctions as a response to perceived or threatened violations of rules, but as the constitution and maintenance of order. We illustrated this point in an earlier article18 in which we looked at the order that is maintained in Disney World. There we argued that what is interesting about Disney World, as a remarkably well-ordered terrain, is not just how sanctions are used (very little), but everything that is done to create the 'Disney order.' In contrast to other forums, where sanctions are central but order is less secure, the ordering of Disney World is a matter less of sanctions than of opportunity management. In this chapter, we have developed the same argument and reached the same conclusion in relation to a very different and considerably more consequential terrain - namely, financial markets. In developing this argument we began by considering the objective of regulation. We sought to demonstrate that the objective was not simply to limit the public harm that unrestricted operation of a financial market might create (a characteristically Hobbesian version of the mechanistic model, which views all regulation as state intervention to protect the weak and/or the collective interest from the evils of untempered self-interest), but also, and as important, to constitute a market that would permit the formation of capital in a manner that would attract all those who can contribute to this end to participate. Within this frame, 'protecting the public interest' turns out to be an equivocal and ambiguous concept that means different things in different contexts. Further, in the course of this analysis we demonstrated that the constitution of a market, and its ongoing maintenance, were an objective shared by a wide range of interests and that a concern for 'the public interest' was not exclusive to the state. We presented a view of regulation at variance with the top-down, state-centred view of the mechanical model and thus set the stage for consideration of control strategies other than the coercive sanctions to which the state has special access. We followed this analysis by an examination of two objectives

118 Securing Compliance

essential to an orderly market, namely, equity and liquidity. We used this analysis to illustrate that regulation in this area is animated by two quite distinctive conceptions of order - 'behavioural' and 'symbolic' which correspond quite closely to Unger's 'substantive' and 'legal' modes of justice. Accepting Unger's assertion that these two modes of ordering may be theoretically irreconcilable, we have nevertheless argued that these two conceptions of order coexist in the minds of those who regulate the exchange and that recognition of this fact is essential to an understanding of this regulatory enterprise. Furthermore, we have suggested that while a number of other salient factors need to be taken into account, the coexistence of these two conceptions of order may well provide a more useful key to understanding the division of regulatory labour between public and private authorities than more conventional analyses, which seek to explain regulatory relations almost exclusively in terms of power, resistance, avoidance, and 'capture.' We concluded our analysis by considering some of the implications of the two conceptions of order for the choice of regulatory strategies that public and private regulators make. Notes An earlier version of this chapter was presented to the 39th Annual Meeting of the American Society of Criminology, Montreal, 14 November 1987. We gratefully acknowledge the support of the Canadian Institute for Advanced Research and the Social Sciences and Humanities Research Council of Canada for assisting the research on which this chapter is based. However, the views expressed are our own and do not necessarily reflect the views of any of these sponsoring organizations. 1 P. Cook, 'Stock Markets: A Bull Too Long in the Tooth,' Globe and Mail, 27 July 1987, Report on Business B2. 2 C. Hagenbeck, Beasts and Men (Berlin: Vita Deutsches Verlagshaus, 1909) 124, 164. 3 T. Walkom, 'The Strange Pull of Market Forces,' Globe and Mail, 29 October 1987, A8. 4 E.g. S. Shapiro, Wayward Capitalists (New Haven: Yale University Press 1984). 5 E.g. M. Clarke, Regulating the City (Philadelphia: Open University Press, 1986).

119 Controlling Interests 6 E.g. P. Grabosky and J. Braithwaite, Of Manners Gentle (Melbourne: Oxford University Press, 1986). 7 E.g. J. Hagan and P. Parker, 'White-Collar Crime and Punishment: The Class Structure and Legal Sanctioning of Securities Violations' (1985) 50 American Sociological Review 302-16. 8 S. Henry, 'Private Justice and the Policing of Labour,' in C.D. Shearing and P.C. Stenning, eds. Private Policing (Beverly Hills, Calif.: Sage Publications, 1987). 9 R. Unger, Knowledge and Politics (New York: Free Press, 1974) 89. 10 Ibid., 90-1. 11 Ibid., 91. 12 See, e.g., K. Hawkins, Environment and Enforcement (Oxford: Clarendon Press, 1984) i; R. Baldwin, Regulating the Airlines (Oxford: Clarendon Press, 1985) 3-4. 13 R. Fellmeth, 'The Regulatory-Industrial Complex,' in R. Nader, ed., The Consumer and Corporate Accountability (New York: Harcourt Brace Jovanovich, 1973); J. Katz, 'Cover-up and Collective Integrity: On the Natural Antagonisms of Authority Internal and External to Organizations' (1977) 25 Social Problems 3-17. 14 H. Barnett, 'Conceptualizing Corporate Crime,' paper delivered at the American Society of Criminology Annual Meetings, San Diego, November 1985, citing E. Kane, 'Accelerating Inflation, Technological Innovation, and the Decreasing Effectiveness of Banking Regulation' (1981) 36 Journal of Finance 355-6715 See N. Reichman, 'The Widening Webs of Surveillance: Private Police Unravelling Deceptive Claims,' in C. Shearing and P. Stenning, eds., Private Policing (Beverly Hills, Calif.: Sage Publications, 1987) for an example of a similar strategy in the policing of insurance fraud. 16 C. Shearing and P. Stenning, 'From the Panopticon to Disney World: The Development of Discipline,' in A. Doob and E. Greenspan, eds., Perspectives in Criminal Law (Aurora, Ont.: Canada Law Book, 1985) 336-49. 17 Unger, Knowledge and Politics 68-9. 18 Shearing and Stenning, 'Panopticon.'

3 Tax Evasion: Searching for a Theory of Compliant Behaviour NEIL BROOKS AND ANTHONY N. DOOB

The Demise of Self-assessment? Canadians take considerable pride in the fact that their income tax system is premised upon voluntary compliance. Whether it is in fact 'voluntary' in any meaningful sense might be disputable; however, the system does require taxpayers to take the initiative in filing timely returns, in assessing their tax liabilities correctly, and in paying taxes when due. The system appears to work reasonably well. In 1984, over 10.5 million income tax returns in which tax was payable were filed by individuals. Fifty billion dollars was collected from these taxpayers as income tax, which was over 36 per cent of total government revenues.l Under this system of 'voluntary' compliance, it cost Revenue Canada only slightly more than one dollar to collect one hundred dollars of income taxes.2 However, particularly in recent years, concern has been expressed about the continued viability of this self-assessment system. There is a feeling that an increasing number of people have begun participating in economic activity - working, buying, and selling - outside the view and control of government. It is assumed that many of these people participating in the so-called underground economy are otherwise law-abiding citizens who are seeking primarily to evade tax. In response to this growing concern, the government has begun to consider alternative tax enforcement strategies. Should the penalties for tax evasion be increased? Should Revenue Canada increase the number, or change the nature of, the audits of taxpayers' returns? Should it

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require more information reporting or withholding of tax at source? Are there educational programs or moral appeals that could increase compliance? Is reducing the complexity of the tax system or reducing marginal tax rates essential to increasing compliance? Obviously, the selection of a tax enforcement strategy should be premised on a theory of tax compliance. The purpose of this chapter is to contribute to our growing knowledge about the basic determinants of tax evasion. It attempts to contribute to the answers to several questions. Why do some taxpayers faithfully report their income year after year, but others engage in tax evasion? Do tax evaders perceive that the chance of getting caught is less than that perceived by non-evaders? Do non-evaders perceive that the legal or social penalty incurred if they are caught will be more severe? Is this group simply more risk-averse? Are non-evaders more likely than evaders to consider tax cheating morally wrong? Do evaders perceive the tax system to be more complex or unfair than non-evaders? Do evaders have different attitudes toward government and government spending than non-evaders? The study of tax evasion is not only important in its own right but is also a fruitful area of study in developing theories of compliant behaviour more generally. Many taxpayers have a clear opportunity to evade taxes. The chances of being audited are low. Even if a taxpayer is audited, underreported income is extremely difficult to detect. The sanctions typically imposed on persons suspected of tax evasion are by any standard mild: very few cases result in a criminal prosecution, and if criminally prosecuted virtually no one is sent to jail.3 The crime of tax evasion has no obvious victim. Finally, compliance is costly, and taxpayers are required to take affirmative action to comply. Therefore, from the perspective of deterrence theory, the more interesting question may be why anyone complies with the tax laws rather than why some do not. Another interesting characteristic for study is that Revenue Canada has available a wide range of instruments to increase compliance: requiring payers to file information returns or to withhold part of payments in partial satisfaction of the payee's income tax liability, taxpayer educational services, audits, the simplification of tax returns and tax legislation, civil and criminal penalties, moral appeals, and so on. Consequently, it should be relatively easy to see what difference one

122 Securing Compliance

theory of compliance should make over another in terms of selecting an appropriate enforcement strategy. A complete cost-benefit analysis of enforcement policies would involve identifying all the instruments that Revenue Canada might use to increase compliance, determining their ideal design, and specifying the level of resources that should be allocated to each to achieve the optimal compliance level. Our purpose is more modest. Based on the results of a small-scale survey that we conducted relating to the determinants of compliant behaviour, we wish simply to examine the major premises that underlie standard deterrence theory in the context of the crime of tax evasion. Most of the recent recommendations for increasing tax compliance assume that taxpayers will respond in a straightforward fashion to rewards for compliance and to punishments for non-compliance. If standard deterrence theory rests on a simplified and incomplete model of human behaviour, then these reforms will be less effective than predicted and could be counterproductive. Dimensions of the Problem In Canada, there are few studies on the size of the underground economy, and none that purports to yield reliable results. The best estimates are that Canadians evade paying tax on from 5 to 8 per cent of the gross national product (GNP) each year, or about $17 billion of income.4 Assuming that this income would be subject to tax at the same effective rate as the share of national income that is reported for tax purposes, governments in Canada lose about $4 billion a year in personal income tax revenues because of evasion, or about 12 per cent of revenues collected. In a recent study of most OECD countries, two investigators, using the 'currency demand' approach,5 estimated the size of the black economy in Canada to be 11 per cent of gross domestic product (GDP) .6 In terms of the level of tax cheating, this would place Canada in about the middle of the OECD countries. Using their measure, the authors found that Italy has the biggest black economy (30 per cent of GDP), followed by Spain (23 per cent), Belgium (21 per cent), and Sweden (13 per cent). Countries with relatively small black economies were the United States (5 per cent) and Britain, Switzerland, and France (all with 7 per cent). Although, based on these studies, at least something is known about

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Tax Evasion

the rate of non-compliance in Canada, nothing is known about where this non-compliance is occurring. By contrast, in the United States, the Internal Revenue Service (IRS) has done a considerable amount of research on ways to estimate the revenue loss resulting from all forms of non-compliance and on where personal non-compliance is occurring. In the absence of good data in Canada, we set out here the American data simply to provide an impression of the common forms that tax evasion takes. In May 1982, the IRS released some preliminary estimates which indicate that the total revenue loss for 1981 may be as much as $97 billion. The major components of the estimate were: (i) unreported income by individuals - $66. i billion; (2) overstated expenses, deductions, and credits by individuals - $12.3 billion; (3) non-filing by individuals - $4.9 billion; (4) non-compliance by corporations - $3.9 billion; and (5) tax losses on income earned from illegal sources - $9.8 billion.7 More detailed estimates of tax evasion are obtained in the United States from the IRS'S Taxpayer Compliance Measurement Programme (TCMP). Under that program, a sample of individual taxpayers is subjected to intensive audits to uncover any unreported incomes and overstated expense claims. This sample yields estimates for the 'voluntary reporting percentages' (VRPS) - the proportions of true incomes actually reported without any enforcement action - for particular types of income. In August 1983 the Internal Revenue Service released a study which, based on TCMP and other data, estimated VRPS for 1981, for various types of income. These estimates are set out in Table i. Another IRS study provides evidence of tax evasion by industry. The study was based on a sample of workers classified as 'independent contractors' and therefore not subject to withholding of tax at source. The percentage of their total income voluntarily reported in various industry categories is set out in Table 2. For all industries taken together, 76.2 per cent of compensation paid was reported by recipients on their tax returns. However there was wide variation across industries, ranging from just 43.5 per cent for taxicabs to fully 98.3 per cent for insurance. In any event, even though little is known about the compliance gap in Canada, there is a widespread perception that if something is not done to control it, the self-assessed, progressive income tax may be in jeopardy.

124 Securing Compliance TABLE 1 Voluntary reporting percentages (VRP), for individual filers and non-filers, by source of income, for net incomes, us, 1981

Source of income

VRP for net income

Wages and salaries Dividends Interest Capital gains Nonfarm proprietor income Partnership and small business corporation income Farm proprietor income Informal supplier income Pensions and annuities Rents Royalties Estate and trust income State income tax refunds, alimony, other income

93.9 83.7 86.3 59.4 50.3 47.0 -18.5* 20.7 86.9 37.2 61.2 74.2 62.0

Total income

87.2

SOURCE: us Internal Revenue Service, Income Tax Compliance Research: Estimates for 1973-1981 (Washington, DC: Department of the Treasury, 1983) 22 *A negative VRP arises because the reported net amount was negative, whereas a substantial positive net amount should have been reported.

Indeed, the case for shifting part of the tax burden to other less progressive taxes, such as a value-added tax or a national sales tax, is often supported by reference to the difficulty of enforcing compliance with the income tax. Consequently, those who feel that the progressive income tax should be retained and strengthened have, in particular, reason to be concerned about increasing compliance with it. In addition to the serious loss of revenue it causes, and the need to maintain the moral acceptability of the income tax, a number of other reasons make it imperative that tax evasion be controlled. First, because the opportunities and the inclination to evade taxes differ among taxpayers, tax evasion undermines the capacity of the government to bring about a just distribution of the tax burden. Most obviously, tax evasion redistributes income from honest taxpayers to dishonest ones. In terms of horizontal equity, the individual who successfully evades

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Tax Evasion

TABLE 2 Extent of income tax compliance by independent contracts, by industry, us, 1978

Industry

Percentage of compensation reported

Taxicabs Logging and timber Warehousing Eating / drinking places Real estate construction Trucking Direct sales Home improvement Other Franchise operations Other sales Consulting Entertainment Real estate Barber / beauty shops Medical / health services Medical organizations Insurance

43.5 52.1 54.0 58.5 63.7 66.7 68.8 70.2 72.5 73.0 74.1 76.3 77.9 89.5 90.0 90.1 97.8 98.3

All industries

76.2

SOURCE: House of Representatives, Committee on Ways and Means, Subcommittee on Select Revenue Measures, Independent Contractors (96th Cong., 1st sess., 20 June, 16-17 July)

taxes attains a higher post-tax income than the honest taxpayer, even though their pre-tax income may have been the same. Vertical equity may also be affected by tax evasion, since some sources of income available to higher- (or lower-) income groups may be more difficult to detect, or some other variable influencing evasion may be correlated to income level, and hence the tax system will achieve greater or lesser tax progressivity than intended. Second, tax evasion has efficiency implications. Tax evasion may divert the allocation of resources away from their most productive use.

126 Securing Compliance

Less productive activities may become more attractive simply because they are easy to conceal from tax authorities. For example, if taxpayers can evade more of their taxes on self-employment income than on wages and salaries, then a disproportionate amount of time will be spent in self-employment. Also, non-compliant activities and individuals will be given a competitive advantage in the economy, leading to inefficient allocation of resources. Third, an additional resource cost of evasion comes from expenditures made by taxpayers to cover their tax deceptions, including, for example, the cost of offshore banks, laundering schemes, payments to unscrupulous tax lawyers, taxpayer time spent planning evasion, as well as the implicit costs (for risk-averse evaders) of chancing detection and arrest or fines by tax authorities.8 Fourth, tax evasion renders economic statistics misleading, which in turn might result in errors in fiscal and monetary policy. The drop in output and rise in unemployment in a recession may be exaggerated, for instance, if the underground economy is large and unaccounted for, and hence the correcting action be made more inflationary than intended. Finally, widespread evasion might lead to the erosion of moral standards generally. Review of Research Very little research was done on taxpayer compliance until the late 19705. Since then, however, particularly in the United States, the research has developed into a cottage industry. As budget deficits grew in that country throughout the 19708, and as stories of a huge, growing, and untaxed underground economy were widely publicized, research proliferated. Research was greatly facilitated when, during the Carter administration, under Commissioner Jerome Kurtz, the IRS commissioned a number of studies with outside agencies and initiated personnel exchanges with university faculties. This research was fuelled by substantial legislative changes in 1981, 1982, 1984, and again in 1986 in order to increase tax compliance. In particular, an array of new penalties and many new information-reporting requirements were enacted. In 1983, the IRS initiated a series of multidisciplinary annual conferences on compliance research strategies.9 These conferences

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bring IRS personnel and external researchers together to discuss major tax compliance issues and potential research activities. More recently, the service has asked the National Research Council to assemble an interdisciplinary panel of distinguished behavioural scientists and tax practitioners. Over the next two years, this panel will develop a long-range research agenda to improve understanding of the factors affecting taxpayer compliance. Against this background, the substantial amount of us research on tax compliance over the last six or seven years has slowly begun to yield insights into tax compliance behaviour. However, a good deal of further research is needed before conclusions will be able to be drawn with confidence. A number of research strategies have been used in the effort to specify the determinants of tax compliance behaviour: (i) theoretical economic analysis, (2) empirical analysis using revenue department data, (3) simulations and laboratory experiments, (4) social experiments, and (5) survey data. In our research, at least in its initial stages, we decided to undertake a survey of taxpayers in order to test various theories of compliance. The major reason for this choice was simple. Our interests were somewhat different from the interests of those who have used other approaches. Thus, those who wish to construct a model of compliance using largely economic predictors have used one of the first two methods listed above. Those who wish to test very specific hypotheses about the determinants of tax compliance or evasion, or who are interested in testing the effectiveness of specific interventions, have tended to use either the third or fourth method. We were interested in trying to understand how tax evaders and tax compilers differ in how they view issues related to tax and tax compliance. For example, deterrence theory is largely a 'perceptual' theory; it suggests that those who think they are likely to get caught are more likely to comply. It is helpful, then, to see if those who evade and those who comply are differentially likely to believe that they will be caught. More generally, our approach in this study was to try to understand some of the differences between those who comply and those who evade. In this chapter we report on and analyse the 260 responses we received from a mailed questionnaire. However, before describing the results of our survey we will briefly review the other research strategies

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that have been used to determine the variables that affect tax compliant behaviour. Theoretical Economic Analysis10 Beginning with Gary Becker's classic 1968 article, 'Crime and Punishment: An Economic Approach,'11 economists have shown considerable interest in modelling the choice confronting individuals who are deciding whether to engage in illegal activities.12 The basic model assumes that people commit crimes when the expected utility of criminal acts exceeds the expected utility of lawful behaviour. The first formal economic model of the decision to commit tax evasion was published in 1972 by Michael Allingham and Agnar Sandmo.13 A substantial literature of increasing sophistication has followed.I4 The general approach of the early studies was to treat the tax evasion decision as essentially a portfolio decision - that is, as a decision problem with uncertain consequences in which all costs and benefits are pecuniary and are known by the decision maker. Allingham and Sandmo, for example, assumed a rational taxpayer who was confronted with a linear tax rate and a penalty schedule and sanction of known probability for non-compliance. The authors then derived conditions under which an increase in the penalty rate and an increase in the probability of sanctions will increase the amount reported on the tax return. In subsequent research numerous refinements were made to this simple model: a progressive rate structure was incorporated;15 the tax system was allowed to affect one's choice of employment, both the hours worked and the choice of working in the 'regular' or 'irregular' economy;16 the effect of changes in interest rates17 and in the rate of inflation were tested;18 and the effect of changes in average as well as marginal tax rates was modelled.I9 Most early models assumed that taxpayers optimize their conduct by reacting passively to whatever tax rules are in force. However, since in reality there is a high degree of interaction between the taxpayers and the tax agent's behaviour - for example, the amount of income taxpayers report will likely depend on the tax agent's audit behaviour, and the tax agent's audit behaviour will in turn depend on information reported in the taxpayer's return - it might be more accurate to model the tax evasion decision in terms of game theory. Reinganum and Wilde20 and

129 Tax Evasion

Border and Sohel21 modelled the decision using a principal/agent framework in which the tax agency (the principal) could observe the taxpayer's behaviour (the agent). An even more interactive gametheoretic model was employed by Graetz, Reinganum, and Wilde,22 who used a Nash equilibrium model in which both the tax agency and the taxpayer could change their behaviour in response to one another's actions. Finally, a number of partial and general equilibrium models have been developed that take into account a number of factors - such as the degree of substitutability in the consumption of the goods and services produced in the evasion and non-evasion sectors - that were ignored in the standard portfolio theory of choice under risk models.23 These theoretical models have generated a number of findings. Most consistently, and not unsurprisingly, they have found that an exogenous increase in the probability of conviction or in the penalty rate will increase compliance. Instead of reviewing all the findings here, we will simply look at those relating to the effect of the tax rate on tax evasion, by way of illustrating the nature and limitations of this type of research. The early models, such as Allingham and Sandmo's, assumed that the tax rate was flat and that the penalty was a fixed percentage of evaded income. On these assumptions, there were two opposing effects - an income and a substitution effect - when tax rates were increased. Consequently, the effect of increasing tax rates on evasion was ambiguous.24 However, in 1974, Yitzhaki pointed out that this ambiguity resulted from holding the penalty rate constant. If the penalty rate were instead expressed as a proportion of tax evaded, then, other things being equal, since the cost of evasion increased as rates increased, increased tax rates would have a pure income effect which would lead to less tax evasion.25 The fact that high marginal tax rates increased compliance was also the conclusion of a model in which the levels of auditing and the non-compliance were modelled as the result of a complex interaction between revenue agents and taxpayer behaviour. This result followed, since, although an increase in the tax rate increased both the marginal gain to underreporting and the marginal gain to auditing, in the formal model the latter effect was found to dominate.26 Finally, it was also the result found in a general equilibrium model of tax evasion. Kesselman concluded: 'A key implication of the general equilibrium model is that

130 Securing Compliance changes in the tax rate or tax mix are ineffective ways of controlling tax evasion on labour income. Relative to the feasible range of variation in tax rates or tax mix, the associated evasion impacts are quite small. Therefore, the choice of tax rates and tax mix should hinge upon policy criteria other than the control of evasion on labour earnings. '2? This theoretical research provides a framework within which policy issues can be discussed in a logically consistent fashion. The most obvious and fundamental criticism of these economic models is that they assume that taxpayers are perfectly amoral, risk-averse, and utilitymaximizing. Furthermore, they assume that taxpayers have at their disposal information that, on average, is a reasonable estimate of the true values of such things as the likelihood and cost of apprehension and the value of evasion. Typically, as well, these models assume that there are no costs other than economic costs in being apprehended. That is, the underlying assumption of the standard micro-economic model is that individuals, in their quest for maximum utility, take advantage of all opportunities available to them. Empirical Studies28 There has been surprisingly little empirical research on tax evasion. Undoubtedly this is caused in large part by the lack of good data on the tax evasion committed by individual taxpayers. The one source of such information is data from the us Internal Revenue Service (IRS'S) Taxpayer Compliance Measurement Programme (TCMP). These data have been used in most us empirical studies. Again, largely by way of illustration, we will review a couple of these studies. The first reported study was done in 1983 by Charles Clotfelter.29 His primary interest was to investigate empirically the relationship between marginal tax rates and tax evasion. By comparing the amount reported by each taxpayer with the amount the auditors of the TCMP deemed 'correct,' he imputed an amount evaded to each audited taxpayer. Then, holding a number of taxpayers' characteristics constant, such as age and marital status, he found that those who faced higher marginal income tax rates understated their adjusted gross income by larger amounts than taxpayers who faced lower rates. He concluded from this that tax rates should be considered 'valid instruments for influencing tax evasion.' Clotfelter's study has a number of difficulties. The difference

131 Tax Evasion

between reported taxable income and the amount of taxable income as determined by auditors is at best a crude proxy for tax evasion (some unreported income found by auditors might have been unintentionally understated; moreover, although auditors are likely to detect fraudulently claimed deductions, they are unlikely to detect many types of unreported income). Since taxpayers with high marginal rates also have high incomes, the results could show only that high-income taxpayers are more likely to evade or have more opportunities to evade without believing that they will get caught than low-income taxpayers. And use of the amount of understatement of tax as the dependent variable means that persons in high tax brackets will, for a given amount of unreported income, inevitably have a greater percentage of taxes evaded. One is reminded of the story of a derelict man sitting on a park bench telling his equally penniless companion, 'One thing you'd never catch me doing is evading taxes.' The problem of separating income effects from marginal tax rate effects might be solved by using inter-jurisdictional variations in income tax rates to isolate the impact of marginal tax rates on compliance. Dennis Cox, in a report of work in progress at the IRS, used TCMP data to compare the effects of state tax rates on compliance.30 Controlling only for income, he concluded that there was 'no relationship between tax rates and compliance that can be exploited in design of our income tax system.'31 Witte and Woodbury also analysed data from the TCMP for 1969.32 Among their findings were: evasion is inversely related to the probability of audit, positively related to the 'opportunities' for evasion, and related to income in a non-linear way, with non-compliance at its greatest at very low and very high income levels. In summarizing their study, they state: 'Possibly our most interesting empirical finding is that the decline in audit rates during the 19705 may have accounted for a substantial portion of the decline in compliance during that period.'33 This last-mentioned finding was confirmed in an empirical study by Jeffrey Dubin, Michael Graetz, and Louis Wilde.34 The specific purpose of their study was to determine whether lowering income tax rates increased tax compliance. They studied the effect of state tax rates on compliance and the effects of inflation on compliance, which, since the us tax system is not indexed, results in implicit tax increases over time through bracket creep. Their main conclusion was that increases in

132 Securing Compliance

tax rates increase compliance.35 However, incidentally, increases in individual non-compliance during 1977-85 were more than accounted for by the decrease in auditing over the same period. Simulations and Laboratory Experiments36 A few investigators have used simulations in order to test for the determinants of tax evasion behaviour. These simulations have normally involved small-scale experiments, in which subjects (typically undergraduate psychology students) are paid a 'monthly' salary. They are given tax tables and asked to assess their tax liability and pay tax under a hypothetical tax system in which evasion will be penalized and audits will be conducted at varying frequencies. Subjects are informed that it is a game and that the winner will be the person with the largest amount of net earnings after tax at the end of the simulation. To determine their effects on tax compliance, in separate conditions such independent variables as the probability of audits, penalties, and tax rates are varied. The results of the experimental studies might be briefly summarized as follows. Friedland, Maital, and Rutenberg found that beyond some rate of tax, the fraction of income reported becomes very elastic with respect to the tax rate and that large fines tend to be more effective deterrents than frequent audits.37 Spicer and Becker found that tax evasion increased for those who felt disadvantaged by tax inequities: 'The percentage of taxes evaded was highest among those who were told that their tax rates were higher than average and lowest among those told their tax rates were lower than average. '38 Spicer and Thomas found that increasing the probability of an audit did not significantly reduce the probability that a person might evade, but to the extent that it did at all, it did only if subjects were told of the precise probability of an audit: imprecise information regarding audit probabilities, whether high or low, had little effect on evasion behaviour.39 And Benjamini and Maital found that higher tax rates led to more evasion and that women evaded more than men.40 The experimental approach, of course, permits greater control over independent variables than is possible in other types of research methods. Thus, it permits a clearer demonstration of causal relationships. However, the artificiality of its laboratory setting may make it

133 Tax Evasion

more difficult to generalize results to tax evasion in the real world. Most notably, the simulations are clearly 'game' situations, not 'legal' situations. Winning is defined as simply getting the most income. Indeed, since differences in accumulation could be achieved only by evasion, participants, as rational players, presumably evade the rules whenever they estimate the benefits outweigh the costs. There is no normative requirement to obey the rules and no psychic costs to being caught.41 Social Experiments42 Randomized controlled field experiments have been used extensively in social research over the past fifteen years to plan and evaluate government programs. Somewhat surprisingly, we were able to find only one such experiment in the area of tax evasion, and it was conducted in the early 19608 by Schwartz and Orleans. The study has since become somewhat of a classic in social experimentation. A homogeneous sample of taxpayers was selected and randomly assigned to either one of two experimental groups or a control group. Members of the experimental groups were interviewed about one month before filing their returns on 1961 income. During the interview they were subjected to comments by the interviewers stressing either the severity of government sanctions against tax evaders or the obligation of citizens to the government and the importance of personal integrity. After the subjects' tax returns were filed, the IRS supplied the investigators with data relating to the adjusted gross income, tax deductions, and tax payment data, for the groups interviewed as a whole for both 1961 and 1962. Based on comparisons of the change in reported adjusted gross income and tax payment figures for the two experimental subgroups and the control group, which received no such communication, Schwartz and Orleans concluded that both threats of sanctions and appeals to conscience encouraged compliance but that moral appeals were more effective. Randomized controlled field experiments are generally the preferred research strategy. Such research yields better, less ambiguous, and more valid estimates of the effect of specified variables than laboratory experiments, attitudinal surveys, or other types of empirical research. Tax compliance would appear to be an obvious area for implementing such research.

134 Securing Compliance

Revenue Canada is ideally suited to conduct such expe iments. It would be easy for it to identify a sample of taxpayers who would normally be subject to a particular course of action, for example, an audit. This sample could then be randomly assigned to two groups - an experimental and a control group. The type of audit done to each group could then be varied. Because Revenue Canada has an extensive data base and the capacity to follow up individuals in terms of their tax behaviour, it could then easily assess the effectiveness of the variable being tested. Furthermore, given that Revenue Canada's ability to intervene in the tax-paying process is limited by the resources available to it (i.e. audits are expensive), there are probably often situations where interventions are carried out on only a portion of those who meet the criteria for intervention. Thus the only difference between a randomized field experiment and normal practice is that within a grouping of people eligible for the intervention, the decision of whom to subject to the intervention is made randomly rather than in a purposive manner. Everyone within the relevant class of taxpayers would have the same likelihood of receiving the treatment in question. Obviously the most difficult problem in doing this type of research is that full co-operation of Revenue Canada is required. Surveys43 A large number of surveys have been conducted relating to tax evasion. Basically, based on the surveyed population's answers to a number of questions, researchers have attempted to divide the sampled population into evaders and non-evaders and then to determine the salient differences between the two populations. Survey research, while subject to many limitations, offers one of the best ways of determining normative influences on compliance behaviour. Therefore, in seeking the determinants of tax evasion behaviour we decided to begin our research on tax compliance by conducting a survey. Surveys done to date have almost all been undertaken in the United States and have varied dramatically in terms of their substantive focus as well as their methodological adequacy. Indeed any comparisons between them is hindered by important differences in sampling and question wording across surveys. In describing our survey and its results

135 Tax Evasion

below we examine in more detail the limitations of surveys and some of the salient findings of previous surveys. Survey Survey Objectives The basic objective of our survey was to explain why some taxpayers evade paying tax and others do not. The dependent variable was the level of the respondent's reported compliance with income tax laws. There are well-known and fairly widely accepted economic, sociological, and psychological approaches to deterrence theory, and since they represent the dominant theories of crime control we derived our independent variables from them. Certainly, deterrence theory has been the primary theoretical framework applied to tax cheating. The economic model of crime control holds that criminals behave basically like all other individuals in that they attempt rationally to maximize their own self-interest. Thus for an economist, the decision as to whether someone will become a criminal is in principle no different than the decision as to whether they will become a bricklayer or a lawyer. The individual considers the net costs and benefits of each alternative and makes a decision on this basis. With respect to the decision to engage in tax evasion, the benefits include primarily the tax saved through evasion. The expected cost of committing a crime has two elements: the probability that punishment will be imposed and the cost of the punishment to the criminal if it is imposed. In the economic model, normally all costs and all benefits are assumed to be pecuniary. Sociologists have extended the basic economic model of crime control by making the point that law is not the only source of punishments and rewards. Taxpayers live and work in society. They have family, friends, and co-workers who are sources of rewards and punishments. These social forces shape behaviour just as effectively as the rewards and punishments administered by the state. The psychological model of compliance also assumes that factors such as opportunity, probability of detection, and size of fine help explain compliant behaviour. However, it points out that these factors are mediated through individual perceptions and attitudes. That is, it assumes that taxpayers are moral beings with ideas and values of their

136 Securing Compliance

own and that commands or impulses filter through and are affected by this moral screen. It has been hypothesized that these normative influences operate through the mechanism of anticipation. In this framework, anticipation of engaging in deviant behaviour produces feelings of guilt. The decision not to engage in the deviant behaviour relieves these feelings. However, neutralization theory suggests that many techniques are available to individuals to reduce the threat of guilt feelings for law violations. These neutralization mechanisms were originally described by Sykes and Matza44 to explain the involvement of juveniles in delinquent behaviour in spite of expressed commitment to the dominant social order and the norms proscribing the delinquent's behaviour. These mechanisms, which may assist in explaining taxpayer non-compliance, include the following. (1) Denial of responsibility. This strategy removes culpability from the individual by placing the blame for behaviour on others. Taxpayers might rationalize cheating on their tax returns by choosing an overly aggressive tax preparer or by complaining that the tax laws are too complex and cannot be understood. (2) Denial of injury. The deviant denies that his or her behaviour has negative consequences for others. Evaders might rationalize their behaviour using this strategy by arguing that there is no victim to the crime of evading taxes or that if they paid their taxes no one would be benefited since government spending is wasteful and inefficient. (3) Denial of the victim. While not denying that their behaviour has negative consequences, law-breakers who invoke this strategy justify their behaviour by asserting that the victim deserves those consequences. Tax evaders may justify their behaviour by the belief that the government deserves to be victimized, perhaps because its enforcement procedures are considered unjust. (4) Condemnation of the condemners. The deviant projects blame upon law-makers as creators of unjust rules that should not be obeyed. Using this strategy, tax evaders might rationalize their behaviour on the grounds that the tax system is unjust and therefore not deserving of obedience. (5) Appeal to higher loyalties. The tax evader might believe that the immorality of government actions justifies non-compliance as a means of withholding financial support. On the basis of standard deterrence theory, we made a number of

137 Tax Evasion

predictions about the likely difference between evaders and non-evaders and used these as hypothesis in drafting our questionnaire and in reporting the results. These predictions are reflected in our choice of independent variables, which are reported below. Research Method Method of Collection In this initial attempt to collect data on matters related to tax compliance, we decided to use a mailed questionnaire. Limited research funds made personal interviewing impossible. Telephone interviewing was considered; however, it too was expensive, and tentative evidence from previous us studies suggested that those interviewed on the telephone tend to be slightly less likely to report tax evasion than do those who respond to mailed questionnaires. We sent out questionnaires (in English only) from Osgoode Hall Law School, in Toronto, with covering letters from us and from the dean of the Law School explaining the purpose of the study and noting, among other things, that the questionnaire was anonymous. A postage-paid return envelope was included with all questionnaires. In addition, for some respondents, a two-dollar bill was included with the questionnaire 'as a token of our appreciation for the time filling out the questionnaire.' Survey Population Respondents were selected at random from two sources: the most recent editions of Might's Directory for Metropolitan Toronto and the most recent Toronto telephone directory. The material was addressed to the person listed in the directory 'or current occupant.' Questionnaires were sent out at two different times. In late March 1987, 600 questionnaires were mailed, and in mid-May another 300 were mailed. The March mailing included 300 questionnaires sent to people whose names were drawn from each of the two lists; half of each group received the two-dollar incentive. All 300 questionnaires in the May mailing were sent to people from the recently released 1987 telephone directory, and all 300 received the two-dollar incentive. In addition, unlike the March mailing, postal codes were included in the May mailing. This last fact, and use of a more recent directory, may explain why significantly fewer questionnaires (8 per cent) were returned as undeliverable in May than

138 Securing Compliance TABLE 3 Response to the survey Total number of questionnaires mailed Number returned (as undelivered mail) by the post office Questionnaires apparently delivered Responses received Effective response rate (%)

900 104 796 260 33

in March (15 per cent). We asked that the questionnaire be completed by any person in the household who files a tax return. Survey Responses Consistent with previous research, the two-dollar 'incentive' increased returns dramatically (from 16-23 per cent to 38-42 per cent). In all, 796 questionnaires were apparently delivered by the post office. By the end of June 1987, 260 of these had been completed and returned, for an overall return rate of about 33 per cent. Preliminary analysis of some key questions (e.g. the index of evasion and the indices of possible future evasion) showed no substantial differences across samples; hence all the data from all 260 completed questionnaires were pooled for subsequent analyses. The relatively low response rate was probably explained by a number of factors. First, since we wanted to ensure anonymity, there was no way for us to follow up on unreturned questionnaires. Second, the questionnaire was long (ten pages, containing sixty-three questions). Third, many less well-educated persons would undoubtedly experience some difficulty understanding the questionnaire. Finally, it was sent out only in English, and Toronto has a fairly large adult population whose first language is not English. Sample Representativeness The sample is not representative of any definable population. In addition, there are intuitive reasons to believe that the rate of non-compliance with the tax laws may be understated by our sample. Those who do not comply with requests to fill out questionnaires for academic researchers on tax evasion may be less likely to comply with tax laws. People who are transient and, therefore, do not have telephones or whose telephone was installed too late to be included in

139 Tax Evasion TABLE4 Age and education of respondents % of respondents

Age 20-29 30-39 40-49 50-59

60+ TOTAL

18

27 17 18 20 100

Highest level achieved Grade 8 or lower High school Some university / college Graduate university / college Post-graduate

2 29 21 30 18

TOTAL

100

the directory may be those whose income is less likely to be subject to information returns or may, for whatever reason, be less likely to pay their full taxes. In one study, mobility was significantly related to admitted non-compliance. Similarly, differences have been shown between those with listed and those with unlisted telephone numbers. Although our sample was not representative of taxpayers in Metropolitan Toronto, it was a rather heterogeneous sample of respondents. Sixty per cent were male. As shown in Table 4, they were quite well distributed across age groups. They were, in addition, relatively heterogeneous in educational achievement, though much more highly educated than the target population. The reported pre-tax income of the respondents ranged from under $10,000 per year (7 per cent) to over $100,000 (6 per cent), with a median in the $30,0005. Dependent Variable: Self-Reported Tax Evasion We used reported behaviour as the dependent variable, rather than using an indirect assessment of tax compliance. In relying on reported behaviour as a measure of compliance, we assumed that taxpayers

140 Securing Compliance

would be reasonably honest in reporting their own non-compliance. A number of factors made us optimistic that people would report noncompliance. First, a number of studies on criminal behaviour generally have used such a measure as an indication of rates of non-compliance with criminal laws and have in various ways been confirmed to be reasonably accurate. Second, survey results of self-reported tax evasion have been remarkably consistent, notwithstanding great variation in samples and questions asked. In seven of the eleven us studies, between 20 and 28 per cent of respondents were classified as non-compliant on at least one general measure of tax evasion. Two studies showed non-compliance rates of about 33 per cent on at least one general measure, and four showed rates of between 9 and 18 per cent on at least one measure. Were there not such a range of samples, and questions asked, there would no doubt be a narrower range of results. For example, some surveys asked whether the respondents had ever evaded tax; some asked about evasion in only one year; some asked about specific forms of evasion; and some asked a general question that might embrace both tax evasion and tax avoidance. Third, the survey results are generally consistent with those collected by the us Internal Revenue Service (IRS) in its Taxpayer Compliance Measurement Program (TCMP). The TCMP obtains its data from intensive audits of a large sample of taxpayers. The TCMP typically shows non-compliance levels of about 26-33 Per cent. The surveys using self-reported tax evasion also show considerable agreement with the TCMP on the specific measures of failure to file, overstating deductions, and under-reporting income. The two obvious sources of bias in the two methods of data collection appear to cancel one another out. On the other hand, one might expect the TCMP to report a larger degree of non-compliance than surveys: surveys tap under-compliance only to the extent that respondents are aware of their actions and are willing to report them. On the other hand, the TCMP might report a smaller degree of non-compliance than surveys, since it relies on the ability of auditors to detect errors. Also, the TCMP has a one-year time frame, while most surveys ask about tax evasion over some longer period. Fourth, there is internal consistency in our survey between admitted evasion and other questions answered by these same respondents. Evaders were more likely than compilers to see various forms of tax

141

Tax Evasion

evasion as being acceptable and to espouse the view that tax evasion hurts nobody; evaders were less likely than compliers to describe their tax filing strategies as simply doing what was expected of them. Operationalizing our dependent variable was not a straightforward task. Tax evasion is an ambiguous, or at least a vague, concept. It has at least three major components: tax evaded on income from illegal activities such as gambling and drug sales, tax evaded on income derived from otherwise legal activities such as unreported cash income of self-employed persons, and tax understated by taking advantage of factual and legal uncertainties about the application of the substantive tax law. Indeed, for this third category, it is often not clear to taxpayers whether they have engaged in tax evasion. We decided to pool, for the purposes of this study, all kinds of tax evasion. Data were obtained by asking respondents directly if they had ever engaged in various forms of tax evasion: not filed when they thought money was owed to the government, claimed deductions they knew or thought probably would not be allowed if the revenue department had full knowledge about them, and not reported taxable income. All these questions made reference to a specific time period: the previous five years. Previous research has not been consistent in the use of a standard time frame. The difficulty in not using a time frame is that, by definition, older taxpayers have a longer period of opportunity to evade tax than do younger persons. However, asking about behaviour during a short period may make people feel that the report of the tax evasion may be detected by Revenue Canada. Because of the small number of respondents, we defined a tax evader as a person who reported having engaged, at least occasionally, in one or more of the forms of evasion. Only 2 per cent of respondents indicated that in any one or more of the previous five years they did not file a return when they should have. Fourteen per cent of respondents indicated that at least occasionally during the previous five years they had failed to report taxable income. This percentage is similar to that found by Yankelovich, Skelly and White, Inc. (vsw)45 - 16 per cent - in their 1984 us survey. YSW found that the primary sources of this unreported income were extra jobs, cash payments, or interest payments. In the Westat46 study, a similar proportion - 11.6 per cent - reported that they under-reported income. Seven per cent of our respondents indicated that they had claimed deductions on one or more occasions during the previous five years that

142 Securing Compliance

they knew would not be allowed if Revenue Canada had complete details about them. Sixteen per cent said that at least on one occasion in the previous five years they had claimed deductions that they thought Revenue Canada probably would have disallowed if it had full details on the transaction. These proportions are somewhat higher that the YSW finding of approximately 7 per cent of respondents who indicated that they had overstated deductions and the Westat figure of 5.5 per cent. Looking at these four questions as a whole, 24 per cent of respondents reported that they had committed one or more of these forms of evasion during the previous five years. This overall figure is comparable to two figures from the IRS'S TCMP studies carried out in 1976 and 1979, where the net proportion of under-compliers was found to be 20 per cent and 25 per cent, respectively. A review of us survey evidence on tax cheating found that the proportion of people admitting tax cheating varied from a low of about 12 per cent to a high of 33 per cent.47 The seven studies reviewed in that paper with questions most similar to ours reported non-compliance rates of about 18 to 28 per cent. Thus our findings are similar to those from other studies. Respondents were also asked if, in the future, they had the opportunity and thought they would not be caught, whether they would engage in any of these three forms of evasion (not filing, claiming inappropriate deductions, and not reporting taxable income). Between 16 per cent and 32 per cent indicated that they 'probably' would evade under these conditions (depending on the exact form of tax evasion referred to in the question). Thirty-seven per cent of respondents indicated on at least one of the three questions that they 'probably' or 'definitely' would evade. Not surprisingly, these two measures - reported tax evasion and the projection of potential future evasion - are related. This table gives us an introductory, speculative glimpse at the importance of deterrence in controlling tax evasion. Among the sixty people who admitted evasion at some point in the previous five years, most (72 per cent) indicated that if an opportunity for cheating without apprehension arose in the future, they would take advantage of it. However, of those who reported complying with the tax laws in the previous five years, most (73 per cent) indicated that they would not cheat in the future even if they had the opportunity to do so without risk. Presumably, these people, on the basis of classical, economic deter-

143 Tax Evasion TABLE 5 Reported compliance and future intention If same opportunity arose, would respondent evade? iveporieu past behaviour

No

Yes

Total

Complied Evaded

141 (120.5) 17 (37.5)

52 (72.5) 43 (22.5)

193 60

TOTAL

158

95

253

NOTE: chi squared = 30.0, p < 0.001 (expected values in parentheses).

rence theory, must be irrational (or their report of their projected behaviour is not consistent with their actual future behaviour). They constitute about 56 per cent of our total sample. Independent Variables Our key independent variables, most of which were derived from standard deterrence theory, were the respondents': (i) opportunity for evasion, (2) perceived likelihood of apprehension, (3) perceived severity of legal sanctions, (4) perceived disapproval from others, (5) perception of evasion by others, (6) self-reported punishment in the form of feelings of guilt, (7) views about the moral acceptability of tax evasion, (8) attitudes about government, (9) views relating to the enforcement of tax laws, (10) views about the fairness of the tax system, (11) perception of self as being honest, (12) contact with Revenue Canada, and (13) demographic characteristics. Opportunity Evaders and non-evaders are undoubtedly distinguished by their opportunity to commit tax evasion. There are gradations of opportunities, and arguably everyone could, if they were bold enough and had taxable income, misstate their incomes; however, for those with one job, for example, and whose tax is withheld at source, the risk of detection becomes so great that at some point it is fair to say that the person does not have an opportunity to evade.

144 Securing Compliance

Forty-one per cent reported receiving all their income as salary. An additional 31 per cent reported receiving over two-thirds of their income as salary. Fifty-nine per cent reported receiving all their income from sources where a 'tax information form' was issued. An additional 20 per cent reported receiving over two-thirds of their income from 'reported' sources. Only 29 per cent reported receiving any of their income in cash. Surprisingly, reported tax evasion was not related to any of these variables. Two considerations may explain this finding. First, our evasion questions were asked in terms of behaviour 'in the previous five years,' and the opportunity questions were asked in a way that probably elicited answers relating to the more immediate past. Respondents' economic situation may have changed in the interim period. Second, many people receiving income from secondary sources may not see it as part of their 'income,' and evasion relating to it may be more a casual than a planned and purposive activity. In other words, although they may normally receive all their income from tax-withheld sources, perhaps once or twice in the previous few years they have received some amount of extra income in cash, part or all of which was not declared. Relating to this is the possibility that our respondents were answering the opportunity question with a concept of 'income' that differed from that used in the evasion question. When asked about the nature of their income, they may have been answering in terms of their 'regular' or predictable income. When asked about income that did not get reported, they might have been thinking about funds received on an occasional (and perhaps somewhat unpredictable) basis that they did not report. In a subsequent survey, we hope to refine our opportunity measure. Perceived Likelihood of Apprehension We asked respondents what they thought the chances were that people would be apprehended for various kinds of evasion (not reporting savings interest, cash employment income, or small business cash income and falsely claiming a business deduction). We surmised that it was likely that those who thought the risks of apprehension were greater would be less likely to evade. However, the results of our survey did not support this conclusion. Fewer than 10 per cent of respondents indicated on any of the four

145 Tax Evasion

questions that they had no idea of the chances of apprehension. It would appear that people do have some beliefs about apprehension. However, in three of the four examples, more thought that evaders would not get caught than thought they would be caught. Only for 'interest for which an information slip had been issued' did a majority (84 per cent) think that they would be caught. (Somewhat ironically - since until recently Revenue Canada had no expeditious way of matching information slips with tax returns - the likelihood of being apprehended for this type of evasion is probably no greater than any other.) Two findings - that most respondents did not believe that the compliance structure of our tax system ensured apprehension of tax evaders, and that most people would not evade even if they had a safe opportunity to do so - suggest that the perceived likelihood of apprehension is not a central factor ensuring compliance for many people. More important in concluding that perceived likelihood of apprehension is not related to compliance was the finding that respondents' perception of their own likelihood of apprehension was not related to their own reported tax evasion or compliance. The lack of a relationship between reported evasion and perceived likelihood of apprehension is similar to some, but not the majority, of previously published studies. The audit of a tax return is one of the major tools available for deterrence, and the perceived likelihood of an audit is presumably related to the likelihood of being apprehended for evasion. Only 19 per cent of our respondents thought that they would probably be audited in the next five years. There is a peculiar, marginally significant difference between those who report evading and those who report compliance: evaders were more likely to feel that they had some idea of whether they would be audited (82 per cent v. 68 per cent; chi squared = 3.89, p < 0.05). But, most important, among those who did have an idea of whether they would be audited, there was no significant difference between evaders and compliers. Perceived Severity of Legal Sanctions Somewhat surprisingly, there was no relationship between reported evasion and respondents' estimates of the likely penalty for evasion of tax. Those who reported evading tax and those who reported not evading had the same overall distributions of estimates of the likely penalty for

146 Securing Compliance TABLE6 Perceived impact of penalty for negligently under-reporting Compilers (%) None Small Great No idea

. 38

TOTAL

100 (193)

34 16 12

Evaders (%)

29 50 19 2 100 (62)

NOTE: chi squared = 10.48, df = 3, p < 0.02.

evasion. Similarly, there was no significant difference between tax evaders and compilers in their views of the most appropriate penalty for tax evasion. Perceived Disapproval from Others We asked respondents to indicate whether they thought there would be harmful effects on their reputation, and whether that effect would be small or great, if Revenue Canada were to take any one of four actions in relation to their income tax return. Not surprisingly, as the level of intervention increased - from an audit to a civil penalty to a fine to imprisonment - the perceived impact on the respondent's reputation increased in seriousness. In the four questions about the perceived effects of various forms of interventions on the respondent's reputation, tax evaders and compliers differed in their assessment of the impact of interventions on their own reputations. There were two somewhat different and surprising effects (see Table 6): tax evaders were more likely to have an estimate of the impact - and to anticipate a negative impact. Thus the results suggest that evaders think more about the social consequences, see them as being greater than do compliers, and then evade income tax. These two findings together suggest that compliers simply do not think about the negative effects of audits, penalties, or criminal sanctions, while evaders do. Compliers are less able even to estimate the likely impact simply because it is not part of the way they think about tax. Evaders, in contrast, have thought about the consequences and yet have decided to engage in it.

147

Tax Evasion

TABLE 7 Attitudes of close friends and family to income tax Compilers (%)

Evaders (%)

All

45 39 14 2 -

23 37 30 10 -

TOTAL

100 (194)

100 (60)

None Small number Some Most

NOTE: t - 4.53, df = 252, p < 0.01 (using a 5-point scale where 1 = none and 5 = all). In Tables 7-9, 13, and 14, Ns that form the basis for the percentages are shown in parentheses. Percentages in some tables will not add up to 100 because of rounding.

Perception of Evasion by Others The perception that others are evading income tax may encourage an individual to evade for a number of reasons. First, people may perceive that if others evade, it is acceptable. Second, they may use this information to infer small likelihood of apprehension. Third, the belief that others evade income tax may lead people to evade to avoid the perception (by self or others) that they are (relatively speaking) being taken advantage of or are being 'chumps' if they do not evade. The findings of the survey that relate to this issue are clear but not simple. From two questions that asked about people close to the respondent it is clear that those who report evading believe that a higher portion of friends, family, and those in the same kind of work evade (see Tables 7 and 8). Two additional questions asked respondents to indicate what portion of various groups in the population as a whole cheated on their income tax. On these questions, there were no differences between evaders and compliers. As a matter of interest, our sample thought that about 26 per cent of Canadians evade some of their income tax. The YSW survey asked two similar questions of its American respondents. About 48 per cent of the American respondents agreed with the statement that 'almost every taxpayer cheats a little' (p. 198). When asked a question similar to ours, the average estimate from the American sample was that about

148 Securing Compliance TABLE 8 Proportion of people in same kind of work seen as cheating on income tax Compliers (%) None Small number Some Most

All TOTAL

40 38 19 3 1 101 (189)

Evaders (%)

18 45 30 7 0 100 (60)

NOTE: t = 3.01, df = 247, p < 0.01.

40.5 per cent of us taxpayers cheat on their taxes to some extent. There was also no difference between evaders and compliers on their estimate of the proportion of those evading income tax who are believed to be evading a substantial amount. Finally, tax evaders and compliers did not differ in their perception of whether there is more, less, or about the same amount of tax evasion as there was in the past. Self-imposed Punishment - Feelings of Guilt Unfortunately, we did not have questions that addressed directly whether evaders were less likely to feel guilt about evasion. The closest information on this issue comes from a question of what the respondents felt kept people from cheating on their income tax. On this question, evaders and compliers did differ; see Table 9. Clearly, the two groups explained compliance with the tax laws in different ways. In comparison to those who did not admit evading tax, admitted tax evaders were more likely to explain compliance in terms of people being afraid of the consequences of being caught. Those who report compliance were more likely to explain compliance in terms of honesty and fairness of most people. There was no evidence, however, that guilt or shame was seen as important for evaders or compliers. For both groups, however, the dominant explanations given were likelihood of apprehension (38 per cent overall) and people's honesty and fairness (37 per cent). Westat reported similar findings (though respondents were allowed to give multiple responses). Fifty-eight per cent of its respondents thought that fear of apprehension was one of the

149 Tax Evasion

TABLE 9 Main explanation given for compliance by 'people' generally

Compliers (%) Fear of apprehension Threat of fine / jail Publicity, guilt, shame People honest, fair People too stupid TOTAL

40 4 6 41 9

Evaders (%)

35 16 10 24 15 100 (62)

100(194)

NOTE: chi squared = 15.63, df = 4,p < 0.01. TABLE 10 Most important reason why people cheat on their income tax (percentages) To beat the system or win out They think they can get away with it. They think that everyone else does it. They think the tax system is unfair. They don't like or can't control how government spends their money.

13 30 13 33 10

important reasons why people comply, whereas about 47 per cent mentioned honesty. Similar results were obtained in the YSW survey, where about two-thirds of respondents mentioned fear of 'getting caught' as one of the main reasons for tax compliance; honesty, however, was only mentioned by about a fifth of respondents. There was no relationship between reported evasion and the explanations respondents gave for why other people cheat on their income tax (Table 10). Only about a third of respondents saw 'safe opportunity' as the major reason for tax evasion. Moral Acceptability of Tax Evasion Not surprisingly, those who admit to evading tax find various forms of evasion more acceptable than do those who do not admit to tax evasion. Whether this is cause or result is, of course, an open question (see Table ii).

150 Securing Compliance TABLE 11 Acceptability of different forms of evasion: proportion finding this form of tax evasion 'not at all acceptable'

Not reporting bartered services Not reporting small second income Over-stating business expense Not reporting cash income

Compliers (%)

Evaders (%)

9 39 73 59

0 17 54 39

Whether it be justification or cause, tax evaders seem to consider the various forms of tax evasion as being more acceptable than do those who report complying with the tax laws. A number of other studies report the same findings. Although the relationship between reported tax evasion and the moral acceptability of various forms of tax evasion is fairly clear and predictable, the relationship is more complex between reported tax evasion and the relative seriousness of tax evasion (generally), as compared to other economic offences where the government is the victim. In four questions we asked respondents to indicate whether evading $1,000 in income taxes was more, less, or equally serious as compared to receiving $1,000 in unemployment insurance benefits illegally, theft of $1,000 worth of government equipment or supplies, smuggling goods and thereby evading $i ,000 in duty, and purposefully doing $i ,000 in damage to government property. With the exception of smuggling, tax evasion was seen as being less serious than other equal-value economic crimes against the government. These results are similar to those found in other surveys. Although in our survey admitted tax evaders did not, overall, see tax evasion (generally) as being relatively less serious than do those who do not admit evading tax, tax evaders did differentiate more than compliers between tax evasion and economically equal crimes. That is to say, fewer tax evaders than compliers saw the two offences as equally serious. Again, this is consistent with the view that evaders, more than compliers, have thought about tax evasion. In a similar vein, for reasons yet to be discovered, tax evaders differentiated more than compliers in their views of the relative seriousness of different forms of tax evasion (see Table 12).

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Tax Evasion

TABLE 12 Perception of relative seriousness of two forms of tax evasion Self reported compliers (%) Evading $1000 in tax by not reporting income Evading $1000 in tax by claiming illegitimate deductions Equally serious TOTAL

Admitted evaders (%)

All (%)

3

10

5

10 87

20 70

13 82

100

100

100

NOTE: chi squared, compliers v. evaders = 6.78, df = 2, p < 0.05. TABLE 13 Perception of harm done by evading tax: 'Nobody is really hurt if I do not pay all the tax I owe' Compliers (%) Agree Depends on situation Disagree TOTAL

10 18 72 100(193)

Evaders (%)

8 34 57

99 (61)

NOTE: chi squared = 7.16, df = 2,p < 0.05.

This last finding is not an artefact of our having pooled various kinds of evasion into a single index of evasion. When the components of this index are looked at individually, the finding - that evaders are more likely to differentiate in either direction between the two forms of evasion - still holds. Also, the finding that tax evaders differentiate more between different forms of offences against the government does not appear to be a result of simple self-presentation. Those who admit under-reporting income, for example, are at least as likely to indicate that this is the more serious form of tax evasion as those who do not admit under-reporting. Not surprisingly, compliers were more likely than evaders to disagree with the statement: 'Nobody is really hurt if I do not pay all the tax I owe' (Table 13).

152 Securing Compliance

Attitudes about Government Taxpayers may be less willing to comply with the tax laws if they think that government spending is too high or if they think it is unwise or inefficient. The payment of taxes might be thought of as an exchange in which the taxpayer purchases, in effect, government services. Some studies have found that if taxpayers are dissatisfied with the exchange they are more likely to evade taxes. However, the causal link between paying taxes and government services might be too tenuous for opinions about the latter to influence the former. Our findings tend to support this notion. Overall, we found no significant relationship between responses to questions concerning respondents' views of government expenditures and overall taxation level on the one hand and reported tax evasion on the other. Respondents were also asked to indicate from a designated list which government programs they thought were receiving more money than they should. Once again, there were no differences that approached statistical significance except for 'grants to businesses,' which was chosen slightly more often by tax compilers than by tax evaders as receiving more money than deserved. (Fifty-six per cent of respondents to this question who reported compliance with income tax indicated that businesses received too much, as compared to 41 per cent of tax evaders. The difference was not significant; chi squared = 3.43, p < o.io.) Views on Enforcement of Tax Laws Our respondents' view of the tax-collecting agency - Revenue Canada - was positive. About two-thirds thought that Revenue Canada was doing a good job. Respondents' views of Revenue Canada were unrelated to reported evasion. Both Westat and YSW found that the us IRS is similarly rated quite favourably. Westat reported that 73 per cent of respondents thought that IRS was doing its job at least 'fairly well,' and YSW reported that 87 per cent thought that IRS was doing a job as good as or better than other government agencies. Fairness of the Tax System Taxpayers may be more inclined to evade tax if they think the tax system too complicated or inequitable. However, our survey found that those

153 Tax Evasion TABLE 14 Strategy employed when filing income tax returns Compilers (%) Rational calculator Strategic minimizer of additional payments Strategic minimizer of tax Model past reporting regardless of law As it was intended I should Other TOTAL

4 5 2 3 82 5 101 (192)

Evaders (%)

18 15 5 11 48 3 100 (62)

NOTE: chi squared ('as intended' v. others, pooled) = 25.02; df = 1; p < 0.001.

who admit evading tax and those who portray themselves as honest taxpayers do not differ in their perception of the fairness of the tax system. Previous studies are inconsistent on whether there is a relationship between perceived complexity and unfairness and selfreported evasion. As a matter of interest, in each aspect that we questioned people on (opportunities for avoidance, horizontal equity, and vertical equity), at least 60 per cent of respondents described the income tax system as being unfair. Perception of Self as Being Honest Evaders and non-evaders were equally likely (88 per cent) to agree with the statement that 'I always or almost always obey the law.' Evaders were, however, slightly less likely to indicate that they pride themselves on being fair (94 per cent of compliers and 85 per cent of evaders - chi squared = 5.16, df = I, p < 0.05 - agreed with this view). These findings are consistent with the YSW survey, which found that attitudes condoning tax cheating were related to a 'flexible definition of honesty.' We also asked respondents what strategy they use in filing their income tax forms (Table 14). Most described their strategy as being rather mechanistic: 'I fill out the tax form as I think it was intended I should.' Not surprisingly, however, reported strategy in filing was related to reported tax evasion. Evaders are much less likely to indicate that they simply fill in the tax form as they think the framers of the income tax act intended they should.

154 Securing Compliance

Contact with Revenue Canada One of the most surprising findings of a number of surveys, including ours, is that those who admit evading tax are more likely to report that they had been questioned by Revenue Canada about their return or that they had been subject to a formal audit than did those who reported compliance. There are a number of possible explanations for this finding. First, it might reflect a negative reaction to an audit or other form of tax department intervention. Stringent assessment may lower willingness to co-operate. Second, a more likely explanation might be that an audit is not as terrifying or as thorough as taxpayers anticipate. Consequently, once taxpayers have been subject to some form of intervention they are no longer deterred from evading by the threat of an audit. Finally, perhaps those who have the opportunity to evade and do evade are part of a class of taxpayers more likely to be subject to investigation because of the nature of the information on their returns. Demographic Characteristics In line with self-reports of involvement in other offences, as well as official reports of other offences, more men than women admitted evading income tax (31 per cent v. 15 per cent; chi squared = 9.75, p < o.oi). These results are similar to results from other surveys. None of the following variables related significantly to tax evasion/compliance: age of respondent; highest level of education achieved; occupation; pre-tax income; and whether the respondent prepared his/her own tax returns. In the published surveys of the literature, the relationship of these variables to tax evasion is inconsistent across studies, with some studies reporting a relationship and some not. Summary Although the data presented in this chapter are obviously based on a small and unrepresentative sample, a number of conclusions can be drawn reasonably safely from the data. (1) A substantial portion (in this sample, 24 per cent) of taxpayers engage in some form of tax evasion at least occasionally. (2) Deterrence is not a major explanation for tax compliance. Several findings lead to this conclusion. Tax evasion does not appear related to safe opportunity to evade: of those who report complying with the income tax laws (76 per cent of our sample), only 27 per cent reported

155

Tax Evasion

that they would evade even if they had a safe opportunity to do so in the future. Evaders view a future audit as more likely than do compliers. Those who admit to tax evasion and those who do not estimate similarly the likely penalty and the appropriate penalty for tax evasion. Most people think that one can get away with most forms of tax evasion without much chance of getting caught. The perception of the likelihood of apprehension for various forms of tax evasion is not related to whether or not a person reports evading tax. And evaders are more likely than compliers to indicate that various interventions by Revenue Canada (audits, penalties, criminal convictions, and fines or imprisonment) would have a large (and negative) impact on their reputations. (3) Tax evaders and compliers differ somewhat in their estimates of others' rates of tax evasion. This difference does not, however, follow a simple pattern suggested by some theories - namely, that evaders should be more likely than compliers to see all segments in society as evaders. Instead the two groups' views of the overall level of tax evasion in the population are quite similar, but evaders are more likely to report that they think that their close friends and family and people in the same kind of work cheat on their income tax. (4) Evaders and compliers differ in some of their explanations for compliance of 'people' generally. Evaders are more likely to attribute compliance by 'people generally' to the threat of fine or jail and to the stupidity of the general population. Evaders are less likely to attribute compliance to people's sense of honesty and fairness. Both evaders and compliers, however, see fear of apprehension as a major explanation of non-cheating on income tax. (5) The moral acceptability and seriousness of tax evasion vary on a number of dimensions. First, different forms of tax evasion are seen in quite different ways. For example, not reporting the value of bartered services received is seen as 'perfectly acceptable' by the majority of both evaders and compliers and as 'somewhat acceptable' by almost everyone else. Not reporting a small second income is seen by both groups as somewhat less acceptable. Exaggerating business expenses, however, is seen as morally unacceptable by the majority of tax compliers and evaders. Second, for all forms of tax evasion measured, evaders were less likely than compliers to describe the behaviour as not acceptable. Third, tax evasion is seen as being less serious a crime than are three

156 Securing Compliance

other crimes where the government is the victim: unemployment insurance fraud, vandalism, and theft. Tax evasion is seen as somewhat more serious than is smuggling. (In all these comparisons, dollar loss to the government was held constant.) Fourth, evaders differentiate between tax evasion and other economic crimes against the government more than do compilers. In other words, they are less likely to see the two offences as equally serious and more likely to indicate either that it is less serious or that it is more serious. Fifth, evaders (defined in general terms or as respondents who admit to specific forms of tax evasion) are more likely to differentiate between the seriousness of different forms of tax evasion (overstating deductions, understating income). (6) Explanations of tax evasion relating to overall views of the tax system and of government expenditures appear unpromising. The tax system was seen by most respondents as unfair overall, allowing unfair avoidance, and as creating various forms of inequity. These views were not related to compliance. Revenue Canada was seen as doing a good job by most respondents; again, however, variations in these views were not related to compliance. The level of individual taxation was seen by most respondents as being too high, but, again, this was not related to tax evasion. The evaluation of government expenditures did not differ between tax evaders and compliers. (7) Most people report that they simply fill out their tax forms as they feel they are expected to do. Tax evaders, not surprisingly, are more likely to report that they engage in some form of strategic behaviour or calculation of risks and benefits of evasion. However, the fact that many tax evaders report that they simply fill in their tax returns as they think they were expected to do suggests that the real decisions about evasion were probably made throughout the tax year (for example, in not recording certain forms of income) rather than when filing their tax return. (8) With the exception of sex, the characteristics of respondents did not differentiate between compliers and evaders. Men were more likely to report evading taxes than were women. From Economics to Sociology to Limited Rationality These findings, though not based on an ideal sample, are from a sufficiently heterogeneous population to warrant drawing tentative

157

Tax Evasion

conclusions about the nature and extent of tax evasion. More definite conclusions, however, can be drawn about the possible directions of future research. The survey itself could be improved in terms both of obtaining a better sample and of more precisely operationalizing some variables. But, more important, the results suggest that we need better theories and models of taxpayer compliance. The theory that informed our survey was a simple model of compliance based on the notion that people respond relatively straightforwardly to rewards (incentives) and punishments (threats). Although we used economic, sociological, and psychological conceptions of rewards and punishments, our results would suggest that, at least in tax compliance, these theories have limited explanatory power. To explain taxpayer compliance we would appear to need a model based on more complex and subtle principles of human behaviour. The insights of one emerging area of study, sometimes referred to as behavioural decision theory, hold some promise. Kahneman, Slovic, and Tversky, and others,48 building on the psychological literature on limited rationality, have explored the various simplifying strategies, or heuristics, that people use in making decisions. Instead of viewing human behaviour as the result of conscious and rational choice (on the basis of full information), they suggest that it can often be better explained by looking at the way in which individuals frame or view decisions and the relatively simple guidelines they use in resolving them. A number of authors have suggested that this approach should be applied to tax compliance.49 A theory of tax compliance would also have to account for the probably habitual nature of much behaviour. In deciding how to report their income, taxpayers likely do not often even actively consider their options. Furthermore, traditional models tend to treat the question of compliance or not as that of making a one-time, simple choice. However, in fact, decisions not to keep track of all income, not to report extra income, to inflate a business expense, or to stretch the meaning of the law, for example, are likely all discrete actions made at various times of the year, involving different decision processes that cannot be embraced within a general decision to comply or not to comply. A bounded-rationality perspective would suggest that to explain compliance, then, we have to know something about how tax routines become established, how they change, and the heuristics people rely on in making judgments about tax matters. At the very least, our research

158 Securing Compliance

suggests the need to recognize a number of decision-making styles. Some people might be rational actors who attempt to weigh the costs and benefits of non-compliance and act accordingly. Others might behave according to heuristic rules of their own that might or might not be rational if all facts were considered; for example, they might decide that they will cheat only on particular types of income that they might regard more strongly as their 'own,' or they might decide at some point that they will under-report $1,000 every year. Finally, others might not be rational calculators or followers of heuristic rules but simply conform each year to past practice. If this is so, then, if taxpayers can be divided into decision-making types, it may be possible to determine the variables considered by the rational calculators, the kinds of heuristic rules followed by some, and the origin of the decision-making habits of others. If social science is to contribute to an understanding of tax evasion behaviour, it must develop a predictive model of human behaviour. The primary paradigm used in studies of tax evasion has been theory of choice. Its basic postulate is that human behaviour is characterized fundamentally by rational individual choice or decision. Our study suggests that in the area of tax evasion this model of human behaviour has much less predictive power than anticipated. Notes 1 See Canadian Tax Foundation, The National Finances 1986-87 (Toronto, 1987), Tables 4.3 and 7.16. 2 See Revenue Canada Taxation, 1985 Inside Taxation (Ottawa: Supply and Services, 1985), 51 (in 1985 it cost Revenue Canada $1.18 to collect $100). 3 Revenue Canada used to publish quarterly an Information Circular that contained a list of all persons charged with tax evasion and a description of the disposition of the case. The last such quarterly report was issued on 8 October 1982. In the last year of reporting there were approximately 250 convictions for tax evasion. Only 3 persons received mandatory prison sentences. From time to time Revenue Canada publishes some very general data on prosecutions in its annual report, Inside Taxation (Ottawa: Supply and Services). In 1986 it reported 148 cases of tax evasion that were settled in the courts; however, it provided no indication of the sentences imposed. 4 The four studies done in Canada, along with some original estimates, are summarized in M. Ethier, The Underground Economy: A Review of the

159 Tax Evasion

5

6 7 8 9

10

Economic Literature and New Estimates for Canada,' in F. Vaillancourt, ed., Income Distribution and Economic Security in Canada (Toronto: University of Toronto Press, 1985) 77. The four approaches used to generate estimates of evasion are: extrapolation from audited tax returns to detect unreported income; comparing 'true' and observed labour-force participation rates to determine the extent of 'off-therecord' activity; following traces that evasion leaves in monetary aggregates; and analysing discrepancies between income accounts and those derived from tax return data. Each procedure suffers from shortcomings. See generally B.S. Frey and W.W. Pommerehne, 'Measuring the Hidden Economy,' in V. Tanzi, ed., The Underground Economy in the United States and Abroad (Lexington, Mass: Lexington Books, 1982) 35; and J. Henry, 'Noncompliance with u.s. Tax Law - Evidence on Size, Growth, and Composition' (1983) 37 Tax Lawyer I. The currency demand approach assumes that deals in the black economy are paid for in cash. Thus the tax gap can be measured by comparing changes in the demand for notes and coins relative to the growth in current-account bank deposits. See reference to a study by F. Schneider and M. Hofreither in the Economist, 19 September 1987, 26. For a discussion of this and other us studies see Henry, 'Noncompliance.' Of course, enforcement activities also create costs not only to the government but also to taxpayers who are required to keep records and so on. See Office of the Assistant Commissioner (Planning, Finance and Research), Internal Revenue Service, Conference on Tax Administration Research Strategies (Washington, DC, 1984); Conference on Tax Administration Research Strategies (Washington, DC, 1985); Research Conference on Trends Impacting Tax Administration (Washington, DC, 1986). M.G. Allingham and A. Sandmo, 'Income Tax Evasion: A Theoretical Analysis' (1972) I Journal of Public Economics 323; J. Aim, 'The Welfare Cost of the Underground Economy' (1985) 23 Economic Inquiry 243; P. Andersen, Tax Evasion and Labour Supply' (1977) 79 Scandinavian Journal of Economics 375; J.C. Baldry, 'The Enforcement of Income Tax Laws: Efficiency Implications' (1984) 60 Economic Record 156; B. Bental, U. Ben-Zion, and A. Wenig, 'Macroeconomic Policy and the Shadow Economy,' in W. Gaertner and A. Wenig, eds., The Economics of the Shadow Economy (Berlin: SpringerVerlag, 1985) 179; K.C. Border and J. Sobel, 'Samurai Accountant: A Theory of Auditing and Plunder' (1987) 54 Review of Economic Studies 525; V. Christiansen, 'Two Comments on Tax Evasion' (1980) 13 Journal of Public Economics 389; F.A. Cowell, 'Tax Evasion with Labour Income' (1985) 26 Journal of Public Economics 19; S.E. Crane and F. Nourzad, 'On the Treatment

160 Securing Compliance of Income Tax Rates in Empirical Analysis of Tax Evasion' (1987) 40 Kyklos 338; S.E. Crane and F. Nourzad, 'Time Value of Money and Income Tax Evasion under Risk-Averse Behavior: Theoretical Analysis and Empirical Evidence" (1985) 40 Public Finance 381; R. Cross and O.K. Shaw, 'On the Economics of Tax Aversion' (1982) 37 Public Finance 36; G. Fishburn, 'Tax Evasion and Inflation' (1981) 20 Australia Economic Papers 325; G. Fishburn, 'On How to Keep Tax Payers Honest (or almost so)' (1979) 55 Economic Record 267; V. Ginsburgh, P. Michel, F. Padoa Schioppa, and P. Pestieau, 'Macroeconomic Policy in the Presence of an Irregular Sector,' in Gaertner and Wenig, eds., The Economics of the Shadow Economy 194; M.J. Graetz, J.F. Reinganum, and L.L. Wilde, 'The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement' (1986) 2 Journal of Law, Economics and Organization i; P. de Gijsel, 'A Macroeconomic Analysis of Black Labour Demand and Supply,' in Gaertner and Wenig, eds., The Economics of the Shadow Economy 218; I. Hansson, 'Tax Evasion and Government Policy,' in Gaertner and Wenig, eds., The Economics of the Shadow Economy 285; A.J. Isachsen and S. Strom, 'The Hidden Economy: The Labour Market and Tax Evasion' (1980) 82 Scandinavian Journal of Economics 304; J.R. Kesselman, 'Evasion of Taxes in General Equilibrium' Discussion Paper 86-45, December 1986, Department of Economics, University of British Columbia, S.C. Kolm, 'A Note on Optimum Tax Evasion' (1973) 2 Journal of Public Economics 265; J.H. Pencavel, 'A Note on Income Tax Evasion, Labour Supply and Nonlinear Tax Schedules' (1979) 12 Journal of Public Economics 115; J.F. Reinganum and L.L. Wilde, 'Income Tax Compliance in a Principal-Agent Framework' (1985) 26 Journal of Public Economics i; J.F. Reinganum and L.L. Wilde, 'Equilibrium Verification and Reporting Policies in a Model of Tax Compliance' 27 International Economic Review 739; J.A. Rickard, A.M. Russell, and T.D. Howroyd, 'A Tax Evasion Model with Allowance for Retroactive Penalties' (1982) 58 Economic Record 379; A. Sandmo, 'Income Tax Evasion, Labour Supply, and the Equity-Efficiency Tradeoff (1981) 16 Journal of Public Economics 265; S. Scotchmer, The Economic Analysis of Taxpayer Compliance; Audit Classes and Tax Enforcement Policy' (1987) 77 American Economic Association Papers and Proceedings 229; B. Singh, 'Making Honesty the Best Policy' (1973) 2 Journal of Public Economics 257; T.N. Srinivasan, Tax Evasion: A Model' (1973) 2 Journal of Public Economics 339; H. Watson, Tax Evasion and Labour Markets' (1985) 27 Journal of Public Economics 231; H. Tauchen and A.D. Witte, 'Economic Models of How Audit Policies Affect Voluntary Tax Compliance,' in National Tax Association and Tax Institute of America, Proceedings of the Seventy Eighth Annual Conference (1985) 39; D. Usher, Tax Evasion and the Marginal Cost of Public Funds' (1986) 24 Economic Inquiry 563; L. Weiss, 'Desireabil-

161 Tax Evasion ity of Cheating Incentives and Randomness in the Optimal Income Tax' (1976) 84 Journal of Political Economy 1343; S. Yitzhaki, 'A Note on Income Tax Evasion: A Theoretical Analysis' (1974) 3 Journal of Public Economics 201. 11 G.S. Becker, 'Crime and Punishment: An Economic Approach' (1968) 76 Journal of Political Economy 169. 12 See, generally, G.S. Becker and W.M. Landes, eds., Essays in the Economics of Crime and Punishment (New York: National Bureau of Economic Research, 1974); J.M. Heineke, ed., Economic Models of Criminal Behaviour (New York, North-Holland, 1978); D.J. Pyle, The Economics of Crime and Law Enforcement (London: Macmillan, 1983). 13 See Allingham and Sandmo, 'Income Tax Evasion.' 14 See note 10 above. 15 See Srinivasan, 'Tax Evasion' and Yitzhaki, 'A Note on Income Tax Evasion.' 16 See Andersen, 'Tax Evasion,' Pencavel, 'A Note on Income Tax Evasion,' Sandmo, 'Income Tax Evasion,' and Weiss, 'Desirability of Cheating Incentives.' 17 See Crane and Nourzad, 'Time Value of Money.' 18 See Fishburn, 'On How to Keep Tax Payers Honest.' 19 See Crane and Nourzad, 'Time Value of Money.' 20 See Reinganum and Wilde, 'Income Tax Compliance.' 21 See Borden and Sobel, 'Samurai Accountant.' 22 See Graetz, Reinganum, and Wilde, 'The Tax Compliance Game.' 23 See Kesselman, 'Evasion of Taxes,' Watson, 'Tax Evasion,' de Gijsel, 'A Macroeconomic Analysis,' Bental et al., 'Macroeconomic Policy,' Ginsburgh et al., 'Macroeconomic Policy,' Aim, 'Underground Economy,' Usher, 'Tax Evasion,' and Hansson, 'Tax Evasion and Government Policy.' 24 See Allingham and Sandmo, 'Income Tax Evasion.' This was the finding on the assumption that the taxpayer is risk averse. If the individual is risk neutral, tax evasion can be predicted to increase if the marginal rate is increased (if the rate is flat). See Srinivasan, 'Tax Evasion.' 25 From the Yitzhaki study it was unclear whether tax revenues would increase even if increased tax rates reduced evasion, since for a given amount of income on which the tax was evaded the tax liability would be greater. Christiansen, 'Two Comments on Tax Evasion,' extended this finding to show that not only did increasing the tax rate decrease evasion, but it also decreased the amount of tax revenue escaping the tax collector. 26 Graetz, Reinganum, and Wilde, 'The Tax Compliance Game.' 27 Kesselman, 'Evasion of Taxes' 43, 44. 28 C.T. Clotfelter, 'Tax Evasion and Tax Rates: An Analysis of Individual Returns' (1983) 65 Review of Economics and Statistics 363; F.A. Cowell, 'The Economic Analysis of Tax Evasion' (1985) 37 Bulletin of Economic Research

162 Securing Compliance 163; D. Cox, 'Raising Revenue in the Underground Economy' (1984) 37 National Tax Journal 283; S.E. Crane and F. Nourzad, Time Value of Money and Income Tax Evasion under Risk-Averse Behavior: Theoretical Analysis and Empirical Evidence' (1985) 40 Public Finance 381; S.E. Crane and F. Nourzad, 'Inflation and Tax Evasion: An Empirical Analysis' (1986) 67 Review of Economics and Statistics 217; S.E. Crane and F. Nourzad, 'On the Treatment of Income Tax Rates in Empirical Analysis of Tax Evasion' (1987) 40 Kyklos 338; J.A. Dubin and L.L. Wilde, 'An Empirical Analysis of Federal Income Tax, Rates: An Analysis of Individual Returns,' SSWP No. 615. California Institute of Technology, 1986; J.A. Dubin, M.J. Graetz, and L.L. Wilde, 'Are We a Nation of Tax Cheaters? New Econometric Evidence on Tax Compliance" (1987) American Economic Association Papers and Proceedings 240; J.A. Dubin, M.J. Graetz, and L.L. Wilde, 'The Effect of Tax and Audit Rates on Compliance with the Federal Income Tax Rates: 1977-85,' SSWP No. 638, California Institute of Technology, 1987; A. Etzioni, 'Tax Evasion and Perceptions of Tax Fairness: A Research Note' (1986) 22 Journal of Applied Behavioural Science 177; J.E. Long, Tax Rates and Tax Losses: A Preliminary Analysis Using Aggregate Data' (1984) 12 Public Finance Quarterly 457; J.M. Poterba, Tax Evasion and Capital Gains Taxation' (1987) 77 American Economic Association Papers and Proceedings 234; J. Slemrod, 'An Empirical Test for Tax Evasion' (1985) 67 Review of Economics and Statistics 232; A.D. Witte and D.F. Woodbury, The Effect of Tax Laws and Tax Administration on Tax Compliance: The Case of the u.s. Individual Income Tax' (1985) 38 National Tax Journal I. 29 Clotfelter, Tax Evasion and Tax Rates.' 30 Cox, 'Raising Revenue.' 31 Ibid., 288. 32 Witte and Woodbury, The Effect of Tax Laws.' 33 Ibid. 34 Dubin, Graetz, and Wilde, The Effect of Tax and Audit Rates.' 35 This confirmed the theoretical prediction of game-theoretic model that they developed in an early article; see Graetz, Reinganum, and Wilde, The Tax Compliance Game.' 36 Y. Benjamini and S. Mahal, 'Optimal Tax Evasion and Optimal Tax Evasion Policy: Behavioural Aspects,' in Gaertner and Wenig, eds., The Economics of the Shadow Economy 245; N. Friedland, S. Maital, and A. Rutenberg, 'A Simulation Study of Income Tax Evasion' (1978) 10 Journal of Public Economics 107; P.A. Hite, 'An Application of Attribution Theory in Taxpayer Noncompliance Research' (1987) 42 Public Finance 105; S.E. Kaplan, P.M.J. Reckers, and K.D. Reynolds, 'An Application of Attribution and Equity Theories to Tax Evasion Behaviour' (1986) 7 Journal of Economic Psychology

163 Tax Evasion

37 38 39 40 41

42 43

461; J. Thibaut, N. Friedland, and L. Walker, 'Compliance with Rules: Some Social Determinants' (1984) 305 Personality and Social Psychology 792; M.W. Spicer and J.E. Thomas, 'Audit Probabilities and the Tax Evasion Decision: An Experimental Approach' (1982) 2 Journal of Economic Psychology 241; M.W. Spicer and L.A. Becker, 'Fiscal Inequity and Tax Evasion: An Experimental Approach' (1980) 33 National Tax Journal 171. See Friedland, Maital, and Rutenberg, 'A Simulation Study.' See Spicer and Becker, 'Fiscal Inequity.' See Spicer and Thomas, 'Audit Probabilities.' See Benjamini and Maital, 'Optimal Tax Evasion.' For a critique of these simulations see P. Webley and S. Halstead, 'Tax Evasion on the Micro: Significant Simulations or Expedient Experiments' (1986) i Journal of Interdisciplinary Economics 87. R.D. Schwartz and S. Orleans, 'On Legal Sanctions' (1966-7) 34 University of Chicago Law Review 274. S.S. Aitken and L. Bonneville, A General Taxpayer Opinion Survey, prepared for IRS, Office of Planning and Research, by CSR Inc. (Washington, DC, 1980); P. Dean, T. Keenan, and F. Kenney, 'Taxpayers' Attitudes to Income Tax Evasion: An Empirical Study' (1980) British Tax Review 28; L. Ekstrand, 'Factors Affecting Compliance: Focus Group and Survey Results,' Proceedings of the 73rd Annual Conference on Taxation 253, National Tax AssociationTax Institute of America, 1980; R. Mason and L.D. Calvin, 'A Study of Admitted Income Tax Evasion' (1978) 13 Law and Society Review 73; R. Mason and L.D. Calvin, 'Public Confidence and Admitted Tax Evasion' (1984) 37 National Tax Journal 489; Y. Song and T.E. Yarbrough, Tax Ethics and Taxpayer Attitudes: A Survey' (1978) 38 Public Administration Review 442; M.W. Spicer and S.B. Lundstedt, 'Understanding Tax Evasion' (1976) 31 Public Finance 295; J. Vogel, 'Taxation and Public Opinion in Sweden: An Interpretation of Recent Survey Data' (1974) 27 National Tax Journal 499; I.G. Wallschutzky, 'Possible Causes of Tax Evasion' (1984) 5 Journal of Economic Psychology 371; I.G. Wallschutzky, Taxpayer Attitudes to Tax Avoidance and Evasion (Sydney: Australian Tax Research Foundation, 1985); K-E. Warneryd and B. Walerud, 'Taxes and Economic Behaviour: Some Interview Data on Tax Evasion in Sweden' (1982) 2 Journal of Economic Psychology 187; Westat Inc, Individual Income Tax Compliance Factors Study: Qualitative Research Results, research prepared for the IRS 1980; Yankelovich, Skelly, and White, Inc. General Purpose Taxpayer Opinion Survey, prepared for the IRS, 1984. The surveys have been reviewed in B.R. Jackson and V.C. Milliron, 'Tax Compliance Research: Findings, Problems, and Prospects' (1986) 5 Journal of Accounting Literature 125; and K.A. Kinsey, 'Survey Data on Tax Compli-

164 Securing Compliance

44 45 46 47 48

49

ance: A Compendium and Review' American Bar Foundation: Taxpayer Compliance Project, Working Paper 84-1 (Chicago: American Bar Foundation, 1984). G.M. Sykes and D. Matza, 'Techniques of Neutralization: A Theory of Delinquency' (1957) 22 American Sociological Review 664. See Yankelovich, Skelly, and White, Inc., 'Opinion Survey.' See Westat Inc., 'Individual Income Tax Compliance Factors Study.' See Kinsey, 'Survey Data on Tax Compliance.' See, for example, D.A. Kahneman, P. Slovic, and A. Tversky, eds., Judgement under Uncertainty: Heuristics and Biases (New York: Cambridge University Press, 1982); and H.J. Einhorn and R.M. Hogarth, 'Behavioural Decision Theory: Processes of Judgement and Choice' (1981) 32 Annual Review of Psychology 53. See J.T. Scholz, 'Coping with Complexity: A Bounded Rationality Perspective on Taxpayer Compliance,' in Proceedings of the Seventy-Eighth Annual Conference on Taxation, National Tax Association - Tax Institute of America, 30; K.W. Smith and K.A. Kinsey, 'Understanding Taxpaying Behaviour: A Conceptual Framework with Implications for Research' (1987) 21 Law and Society Review 639; J.S. Carroll, 'Compliance with the Law: A DecisionMaking Approach to Taxpaying' (1987) 11 Law and Human Behaviour 319.

4 Regulating Traffic Safety MARTIN FRIEDLAND, MICHAEL TREBILCOCK, AND KENT ROACH

Introduction1 We undertook this examination of techniques of controlling traffic accidents as part of a larger study of sanctions and rewards in the legal system.2 We thought that an understanding of what worked and did not work in the traffic area might give us insights into the regulation of conduct in other fields of law. Traffic accidents were a particularly appropriate focus, we thought, because of the good statistics that we assumed were available and because of the extensive research and other resources that had been and are devoted to the field. We were wrong. The statistics are not particularly good; the effects of various interventions are not well documented; and there is no clear consensus on what works and what does not work. This study outlines some of the techniques of control used to reduce the frequency and severity of traffic accidents, tries to explain why so little is known, and speculates on what approaches may prove most productive. Most of the effort to control accidents has concentrated on changing driver behaviour, the subject of part i (sections 1-5). Police surveillance and prosecution have dominated control strategies. But one looks in vain for studies that compare the cost-effectiveness of policing with, for example, road maintenance or specific safety features in cars, the types of environment-centred measures considered in part n (sections 6-9). Nevertheless, after reviewing the traffic safety literature, our strong impression is that we have concentrated and continue to concentrate our resources too heavily on changing driver behaviour. Switching some of the resources now devoted to policing and prosecutions to improving car

166 Securing Compliance

and road design and to curtailing activity levels of high-risk classes of drivers would, we believe, improve road safety. The increasing centrality of the automobile in our lives can be captured by a few suggestive statistics. Table i shows the growth in per capita motor vehicle ownership in the United States, the state of New York, and the Canadian province of Ontario from 1930 to 1985.3 With the constant and dramatic growth in vehicle ownership, the amount driven has, of course, also increased. For example, in Ontario, an estimated 5,600 million kilometres were driven in 1931, compared to an estimated 71,500 million kilometres in 1987.4 Increased driving has brought with it increased exposure to the risk of automobile accidents, and a recent report on motor vehicle accident compensation in Ontario concluded: 'The social and economic cost of motor vehicle accidents is staggering. In 1986, approximately 6% of Ontario drivers were involved in 187,286 reported motor vehicle accidents; over 100,000 were injured; 1,102 were killed. The average Ontario driver, if licensed at age 16, will drive 650,000 kilometres, become involved in two motor vehicle accidents and be injured in one of them. One in 100 will be killed.'5 The total number of motor vehicle fatalities in Ontario was 517 in 1930. This number increased fairly consistently over time, peaking in 1973, with 1,959 fatalities, and since that time declining to 1,229 in 1987.6 American data reveal the same broad trends.7 Despite the reality that until the last decade there were increasing aggregate numbers of motor vehicle fatalities, fatality rates have actually dramatically declined in most industrial countries when the distances driven are considered. For example, in Ontario in 1931, 10.2 people were killed per 100 million kilometres driven; in 1940, 8.6; in 1950, 5-3; in 1960, 4.2; in 1970, 3.2; in 1980, 2.1; in 1987, I.7.8 us fatality rates similarly declined from 4.8 people killed per 100 million kilometres driven in 1950 to 3.2 in 1960; 2.9 in 1970; 2.1 in 1980; and 1.6 in 1984.9 There has been a fairly uniform decrease in fatality rates in many other countries over the years. The OECD in a recent study notes: 'It is remarkable that this uniformity exists in spite of the diversity of legislation, governmental structures, safety programmes and their management.'10 Accident and personal injury trends are more ambiguous, in part because problems of reportability (a wish to conceal accidents; changing

167

Regulating Traffic S afety

TABLE 1 Vehicle Registrations per 100 Population

1985 1980 1970 1960 1950 1940 1930 1920

Ontario

New York

USA

60.4 63.0 39.1 33.8 24.7 18.8 16.6

50.2 45.6 36.8 30.2 25.2 20.6 18.5 6.5

71.3 68.7 53.3 41.2 32.5 24.6 21.8 8.7

7.7

legal and insurance reportability thresholds) and subjectivity in reporting (by police or traffic personnel) render the data much less reliable. Despite these reservations there were 203,431 reportable accidents, 80,432 personal injury accidents, and 121,089 motor vehicle-related personal injuries in Ontario in 1987." The purely economic costs of motor vehicle accidents in Ontario in 1982 is estimated to be $1.7 billion.12 In 1987 the estimated property damage caused by motor vehicle accidents was over $680 million.13 In terms of demand on police and court resources, there were over 1.2 million convictions under the Ontario Highway Traffic Act in 1987, the vast majority being for speeding.14 In Canada 128,055 persons were charged with drinking and driving offences, and even though this number represented an all-time low since data collection began in 1974, it still accounted for one in five persons charged with any offence under the Criminal Code.15 Personal injury and accident rates, per million kilometres driven, have fallen much less dramatically than fatality rates; over the past two decades they have remained fairly constant. These trends are depicted in Figures i and 2.16 The divergence between fatalities and injuries might permit at least two explanations: first, while accident frequency has not declined, accident severity has done so, perhaps reflecting safer vehicles; second, medical science continues to make advances so that many auto-related personal injuries that would once have been fatalities are now non-terminal. Possibly both factors (safer vehicles and improved health care) are at work.

168 Securing Compliance

Figure I Ontario accident rates: type of accident per million kilometres, 1965-86 (SOURCE: Ministry of Transportation and Communication, Ontario Road Safety Annual Report)

These statistics illustrate that traffic accidents have been an important social problem over the past fifty years. Vast resources have understandably been devoted to the regulation of traffic safety. Let us look at some of the approaches that have been taken to the road safety problem. A variety of legal interventions were used to regulate the automobile as it was introduced and then popularized. Before automobile fatalities reached significant rates,17 regulatory patterns were borrowed from the laws applied to horse-drawn carriages. Sanctions were devised, first in Britain and then in Canada, which made the causing of bodily harm by 'wanton or furious driving or racing, or other wilful misconduct, or by wilful neglect'18 a crime, punishable by up to two years' imprisonment. Likewise, sanctions prohibited reckless driving19 and drunk driving,20 first through the use of fines directed against those driving horses, and later by possible terms of imprisonment under the criminal law directed against those driving automobiles.21 From the start, traffic regulation focused on control of driver behaviour through the threat of sanctions. The prevalence of deterrence strategies of controlling traffic can in part be explained by the automobile's introduction at about the same

169 Regulating Traffic Safety

Figure 2 Fatal accident rates in Ontario, per 100 million km, 1965-86 (SOURCE: As for Figure i)

time as the culmination of a shift in emphasis in methods of policing. Albert Reiss has persuasively shown this 'strategic shift' from inspection and compliance to apprehension and the 'deterrence model of policing. '22 'Compliance systems,' he states, 'aim to prevent violations of the law from happening or to reduce their harmful consequences. Deterrence systems must allow violations of the law to occur so that those violations can be punished to produce the deterrent effect. ' 23 If the automobile had been introduced earlier and had not been rapidly popularized, its regulation perhaps might have followed the pattern of the regulation of ships and railways, which do not rely primarily on the deterrent effect of criminal prosecutions. For example, both railway companies and unions prohibited their employees from drinking and driving, and it was assumed at the turn of the twentieth century that 'the precaution of railroad companies to have only total abstainers guide their engines will soon extend to the owners and drivers of... new motor wagons.'24 If traffic safety regulation had originally been oriented toward compliance as opposed to deterrence, regulation through civil

170 Securing Compliance

liability and insurance (see section 2), licensing (section 4), informal systems of sanctions (section i) and rewards (section 3), and education (section 5) might have played a larger role in traffic regulation than they have done. Although the compliance technique of licensing was used in the early regulation of traffic safety and some safety advocates called for greater reliance on licensing (as was done in the case of railway engineers subject to compliance-oriented forms of regulation25), licensing for automobiles was used mainly to reinforce the criminal process. Provisions were first made in 1901 in New York and in 1903 in both Ontario and Britain26 for registration of motor vehicles, licensing of drivers, and display of licence plates. Licensing of drivers was used mainly to facilitate imposition of sanctions through identification of offenders who might not stop for the police and also as a means to generate revenue. In many jurisdictions it was often possible to obtain licences through the mail and no tests were given to prospective drivers before they obtained a licence.27 Revocation and suspension of a driver's licence were provided as a sanction for violations of motoring rules or other misconduct.28 Licensing techniques were used to sanction identified acts of driver misconduct and not to screen the pool of drivers so as to prevent traffic violations and accidents. Civil liability has also played a role in regulating traffic safety, but its deterrent effects have been muted by the early availability of motor vehicle insurance. Well into the nineteenth century, it was assumed that a contract for insurance against legal damages would be held void as against the public policy implicit in the court's award of damages.29 By the time the motor vehicle was popularized at the turn of the twentieth century, however, this belief had eroded and comprehensive motor vehicle insurance was available.30 The use of insurance to mute the financially disastrous effects of potential third-party civil liability awards is well illustrated in a letter that George Bernard Shaw wrote to a friend in 1913 urging that she obtain insurance against third-party claims 'instantly.'31 Insurance against certain third-party claims became compulsory in Massachusetts in 1927 and in Britain in I93O.32 The effects of these provisions remain largely a matter of conjecture. Under the Massachusetts system, rate-setting apparently became politicized and there was no system of experience rating of individual drivers. At the same time,

171 Regulating Traffic Safety

however, the system may have retained some of the residual deterrent effects of the civil liability system by placing limits on the amount insured.33 The decline in motorcycle registrations following enactment of the British compulsory insurance law can be related in part to the financial burdens of insurance, which priced impecunious motorcyclists off the road. This use of insurance pricing to reduce activity levels has been called 'an effective means of lowering road deaths' through reducing the proportion of more accident-prone motorcycles in the vehicle fleet.34 Despite the potential of the civil liability system, even mediated by insurance, to contribute to traffic safety, both the civil liability and insurance systems have become increasingly oriented to compensation rather than to either deterrence or the removal of accidentprone drivers from the road. In the mid-19305, highway safety advocates began to focus on driver education as a means to prevent traffic accidents. Accident theory at the time stressed driver irresponsibility as the cause of accidents, but the assumption that driver education would reduce highway injuries and fatalities was never proved. In a 1962 critique of driver education, The Highway Jungle, Edward A. Tenney demonstrated a relation between increased enrolment in teenage driver education and increased driving exposure and accidents. The most striking example of the negative effect of driver education was in Michigan. That state won an award in 1960 based on its achieving 100 per cent of its potential enrolment in high school driver education by making education mandatory for licensing but at the same time recorded a 15 per cent increase in traffic fatalities.35 Despite such evidence, many commentators and policymakers persisted in believing that driver education could reduce traffic accidents if it increased drivers' safety awareness and responsibility. For the first fifty years of the motor car, little attention was devoted to such environmental factors as the safety effects of vehicle and road design (see sections 7 and 8). At an early date, cars were required in Britain and Ontario to use night-time lamps and warning bells in order to prevent accidents.36 With the exception of some manufacturer concern about the safety of the glass used in windshields, motor vehicles were not designed to lessen the severity of injuries sustained in automobile accidents. In general, manufacturers were more concerned with the cosmetics of annual style changes and the quest for faster, more

172 Securing Compliance

appealing automobiles than they were with the safety implications of their constant design innovations.37 Various safety advocates made proposals that the maximum speed of vehicles be reduced by 'gearing down' so that they could not achieve high speeds, but the proposals were universally rejected.38 Road design, like vehicle design, did not place safety first. The chief concern in the design of roads was cost, durability, the nuisance of dust, and maintenance of traffic flow,39 not prevention of automobile accidents through, for example, use of controlled access roads or physical separation of pedestrians from automobiles. Speed limits have from the start been a staple of traffic regulation. Maximum speed limits were first used to discourage automobile travel in the last half of the nineteenth century,40 but they were used less restrictively with the increasing popularity of motor vehicles. Exact speed limits remained matters for political compromise between advocates of motor cars and groups such as cyclists, pedestrians, and farmers, who disliked 'road hogs' and the use of the motor car in general.41 Motorist groups, supported by recommendations of two British royal commissions,42 consistently opposed speed limits and suggested that laws against dangerous driving be more rigorously enforced43 and 'danger zones' requiring 'special caution' be marked.44 Maximum speed limits outside towns were even abolished in Britain and in some Canadian and American jurisdictions, for a period in the 1930s,45 but the safety effects of these changes are far from clear. Before the 19605 almost all traffic safety regulation had been directed at influencing the behaviour of the driver and preventing46 crashes - the focus of part i. Depending on the interests of the advocate, most accidents were attributed to human error and irresponsibility by either drivers or pedestrians or simply acts of God.47 Most people believed that improvement in driver performance was needed to reduce traffic accidents, and there was considerable reluctance to focus on either the vehicle or the roadway environment as a cause of accidents or even as a means to regulate traffic safety.48 Criminal sanctions against dangerous, careless, or drunken behaviour of drivers were the most popular forms of control, but speed limits, licence suspensions, driver education, civil liability, and the operation of insurance markets were also used to influence the behaviour of drivers.

173 Regulating Traffic Safety

Starting in the late 19505, attention was no longer exclusively focused on drivers' care levels and the prevention of crashes, as traffic safety experts and eventually policy-makers began to realize that the damage sustained in crashes could be reduced by other forms of environmental regulation - the focus of part n. Physicians and researchers began to study the ways in which injuries, as opposed to accidents, could be prevented and reduced. At this time they proposed use of seat-belts to decelerate the body within the vehicle and lessen the consequences of what became known as the 'second collision.' They also criticized auto manufacturers for making cars with interiors and exteriors that were unforgiving to humans upon collision.49 At a political level, consumer groups eagerly embraced the criticisms of automobile design,50 and policy-makers became sceptical of the traditional focus on driving behaviour and looked increasingly to new forms of public regulation that they hoped would reduce, even cure, 'the highway epidemic' in the same scientific manner as many public health problems such as tuberculosis and typhoid had been overcome through centralized regulation.51 The culmination of these intellectual and political trends occurred in 1966, when the us Congress introduced a comprehensive, centralized regulatory framework for automobile design.52 A new era in traffic safety had begun, influenced in large part by accident analysis, which stressed regulation of automobile safety (see section 7) and highway design (section 8), not control of driving behaviour, to reduce both the frequency and the severity of accidents. The intellectual foundation for the new focus on the safety effects of automobile and environmental design came primarily from the work of William Haddon, Jr, who as an epidemiologist advanced a conceptual framework (the Haddon matrix) that provided a new way of analysing automobile accidents and the various methods of reducing their costs; as a policy-maker he headed the first American agency with a comprehensive mandate to regulate traffic safety.53 The Haddon matrix continues to provide the analytic framework for much continued research in traffic safety.54 This matrix distinguishes human, vehicle, and environmental factors in accidents and temporally breaks down accidents into pre-crash, crash, and post-crash phases for analysing potential interventions. These categories had their origins in the traditional epidemiological terms of host (in this case, those injured in motor vehicle accidents), agent (mechanical energy of the vehicle), and environment (the vehicle

TABLE 2 Haddon matrix

Human

Vehicles and equipment

Environment (physical)

Environment (socio-cultural)

Pre-crash

Driver education, licensing, prohibitions against speeding, careless and drunk driving

Motor vehicle design standards (e.g. centre-mounted brake light), lower speed capacities in vehicles

Roadsigns, highway design, separation of pedestrians from vehicles by walkways and barriers

Taxation of fuel and cars, minimum drinking and driving ages, liquor control regulation

Crash

Use of motorcycle helmets and seat-belts

Designing interiors to reduce the effects of the second collision, i.e. collapsible steering wheels, padded dashes, resistant windshields, head rests, automatic seat-belts and airbags

Barriers that gradually decelerate the vehicle

Attitudes toward seat-belt usage

Post-crash

Limiting access of the most vulnerable people in this phase to licences (e.g. the aged and haemophiliacs), requirements to stop and provide assistance after an accident

Fire-resistant fuel tanks, regulation of the repair industry

Roadside emergency telephones and access for emergency vehicles

Emergency health care service and rehabilitation efforts

175

Regulating Traffic Safety

and surroundings in which the host and agent interact). Haddon argued that attention should be paid to all three factors, because automobile accidents represented 'a straightforward example of the epidemiologic triad: the host - the person susceptible to injury - interacts with the necessary, specific agent - mechanical energy - and with the enviro ment - the impacted structure and the interacting characteristics of all three determine whether the specific pathology, that is, mechanical energy exchange injury, occurs and with what timing, characteristics, and severity.'55 The matrix, with concrete examples of various interventions, is presented in Table 2, but we shall first outline the intellectual perspective that Haddon and his fellow epidemiologists brought to the study of traffic safety. The epidemiologists imposed on traffic safety a vast store of knowledge accumulated from the study of the control of infectious diseases and a scientific perspective that dismissed 'the unscientific term "accident" with its connotations of chance, fate and unexpectedness.'56 Failures in human performance were bound to occur, and 'the design of any system should be based on expectations of minimum levels of human performance.'57 Some automobile crashes were inevitable, and Haddon criticized current traffic safety measures, almost all aimed at driver behaviour in the pre-crash phase, for their preoccupation with human factors and with reducing the incidence of crashes. Greater attention to the injury-producing effects of the vehicle and crash environment could prove the most effective means to reduce the harmful results of automobile accidents as measured by injuries and deaths. The epidemiologists' concern with injury led them to concentrate on the effects of the 'second collision,' as energy is released with the abrupt deceleration of a vehicle's occupants within the vehicle upon collision. They sought, wherever possible, to limit the energy created and to spread deceleration forces over space and time in order to avoid harmful levels of energy release that would result in injury.58 Their policy prescriptions concentrated on the accident environment as the most effective target for collective and centralized regulation and devoted less attention to the prevention of individual error and the assignment of individual blame.59 The new injury-control perspective challenged traditional legal interventions based on concepts of fault, negligence, and individual

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responsibility. For example, even in a case of an accident involving a driver who is drunk, epidemiologists refuse to concentrate solely on impairment of driving skills but also explore environmental factors that contribute to injury.60 They ask the question: why did the roadway environment become too challenging for the drunk driver at the particular location of the accident? Could the injuries sustained in the alcohol-related accident have been prevented or reduced in severity by safer vehicle design and better post-crash treatment (see section 9)? In their efforts to discover the most effective means to reduce injuries, epidemiologists were willing to accept human (mis)behaviour as a given and avoided moralistic approaches to public health problems. Haddon re-evaluated the significance of the search for primary causal factors which were the premise for most findings of criminal or civil liability. The discovery or prevention of the proximate cause of accidents was not likely to be the most efficient means to prevent the harm. He argued: The choice of countermeasures should not be determined by the relative importance of causal or contributing factors or by their early occurrence in the sequence of injury-producing events ... Rather priority and emphasis should be given to the measures that will most effectively reduce losses from injury. As a result of failure to understand this point emphasis on human error as the cause of most injuries has resulted in undue emphasis on changing behaviour, rather than on using more effective measures to reduce injuries and their results.61

Causal analysis had encouraged policy-makers to concentrate on the most overt cause of damage and ignore the basic epidemiological insight that injury was the result of the necessary interaction of agent, environment, and host and that a change in any one factor could prevent or reduce the severity of injury.62 In a traditional legal framework, much energy is devoted to isolating and punishing blameworthy behaviour,63 whereas in the epidemiological framework, attention is devoted to whatever source will be most effective in reducing injuries and their harmful consequences. Epidemiological research has been characterized by general scepticism about the effectiveness of trying to change the levels of care that individuals adopt in potentially hazardous activities, although in recent years there has

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been increased interest in examining the interaction between behavioural and environmental determinants of injuries.64 The epidemiological approach to motor vehicle accidents should be seen as a framework that expands the possibilities and scope of legal regulation rather than one that entirely rejects the efficacy of traditional legal sanctions directed at driver behaviour. The adaptation65 of the Haddon matrix in Table 2 illustrates that each cell can be a locus for legal regulation, imposition of sanctions, and offering of rewards. The symmetry of the matrix should not confuse policy-makers into assuming that interventions in each cell could be equally effective in reducing injuries. As we have discussed, Haddon himself was most optimistic about the possibility of regulation of the vehicle-crash phase.66 Haddon and other epidemiologists have often been perceived as advocates for passive strategies such as airbags which are centred in the vehicle-crash phase. Their policy proposals reflect in part a desire to overcome historical neglect of the crash phase as well as scepticism about the possibilities of changing the behaviour of individuals on a large scale. Haddon compared the active strategy of influencing people to wear seat-belts to the passive strategy of regulating airbags. Airbags and seat-belts both attenuate the potentially damaging energy transfer that occurs with sudden deceleration, but the active approach of seat-belts requires, 'for complete success, billions of individual actions per month by all sorts of people in all sorts of mental and physiological states. On the other hand, the universal provision of airbags to achieve the same purpose would require only a single behaviour change - a simple binding decision by one federal official or by some three or four executives of motor vehicle manufacturing companies.'67 Haddon insisted that the active approach of encouraging seat-belt use through sanctions and education and the passive approach of requiring automatic restraints through regulation were 'compatible and complementary,'68 but he made it clear that over the broad range of injuries and diseases, preventive passive approaches had enjoyed more success than active approaches, which require widespread changes in the behaviour of individuals.69 The Haddon matrix and the epidemiological approach to injury control have been influential in conceptualizing the social problem of automobile accidents and the damage they create. Despite resurgence in concerns about regulating the behaviour of drivers and stressing

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individual responsibility, a prestigious panel recently appointed by the us National Research Council concluded that the most effective and promising manner of reducing injury was through product and environmental design. Such design, once in place, provides automatic protection without the manipulation of mass behaviour through the widespread use of sanctions, rewards, or education.70 A major analytical challenge to the epidemiological perspective that treats driver behaviour more or less as given and emphasizes changes to the accident environment has emerged over the last decade or so and is discussed in section 7. This challenge rejects the notion that road users should be viewed as passive agents in the traffic environment and argues instead that road users are likely to adapt their behaviour in response to changes in that environment. This competing perspective was brought into prominence through a controversial article published in 1975 by University of Chicago economist Sam Peltzman,71 who argued, on the basis of empirical analysis, that motor vehicle safety design improvements mandated under the us National Traffic and Motor Vehicle Safety Act of 1966 had had no effect on subsequent fatality trends: 'The one result of this study that can be put forward most confidently is that auto safety regulation has not affected the highway death rate. '72 Peltzman postulated that by reducing the consequences of the second collision through safety regulations, risk taking, or what he calls 'driving intensity,' would be increased as drivers drove less cautiously in order to achieve the same trade-off that they had experienced prior to regulation between expected accident costs and benefits from conserving time on the road. In Canada, Gerald Wilde, a Queen's University psychologist, had even earlier developed a theory he called 'risk homeostasis. '73 Building on the work of a psychologist74 who had shown that galvanic skin responses (indicating levels of anxiety) remained more or less the same under various driving conditions, Wilde developed a theory that all safety improvements are used up by the population as a whole in riskier driving. The homeostasis theory was to a considerable extent subsequently adopted by John Adams75 of the University of London (see sections i - re seat-belt usage - and 8) and has been the subject of vigorous debate in the literature.76 We accept that there will be some adaptive behaviour in drivers to

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safety features. Studies that show, for example, that drivers with studded tires take curves on icy surfaces faster than drivers without such tires77 are not surprising. One tends to speed up when road conditions are good and slow down in poor weather or when one's brakes are not working properly. But many safety improvements, such as collapsible steering wheels, safety glass, and stronger side-door beams, are not known or only imperfectly appreciated and so do not generate immediate feedback to the driver. So there is not likely to be much, if any, compensation in these cases. Moreover, as we will see in the discussion of seat-belts, it is unlikely that drivers will increase their driving risks just because they are belted. Drivers do not want to experience an accident, even if it is less severe than it might otherwise be without their being belted. So it is unlikely that there is any compensation in the case of seat-belts, let alone homeostasis. The one area where there may be some risk homeostasis is when drivers are deliberately seeking risks. Leonard Evans, who argues against risk homeostasis, shows its applicability to car racing. Although safety keeps improving at the Indianapolis 500, deaths per kilometre travelled have remained about the same since the race started in 1911; but speeds have increased from an average of 120 kilometres/hour in 1911 to 263 kilometres/hour in I984.78 Adaptive behaviour - and we believe that it does take place to some extent79 - will reduce the potential impact of safety improvements. Improvements in car safety and road design cannot deliver quite as much as they promise. The larger problem, however, lies in the political economy of safety regulation. Attempts to mandate further safety features in automobile design standards have encountered much political and legal resistance in the United States.80 Given the limitations presented by the problems of political feasibility and risk compensation, we believe that controlling driving behaviour will still have a role to play in future traffic safety programs. An important factor that has brought the use of the criminal law back onto centre stage over the past decade is the increasing political activity of pressure groups concerned with victims of drunk driving and the sensitivity of politicians, police, and prosecutors to these groups. This is part of a growing trend toward concern for victims of crime,81 coupled with a move away from rehabilitation toward 'just deserts' in criminal justice.82 Whereas in the 19608 collective responsibility for traffic safety

i8o Securing Compliance was stressed through the epidemiological vision, the 19808 has witnessed a resurgence of attention to the role of driving behaviour and individual responsibility for traffic accidents. We turn now, in part I, to the various types of interventions, starting with driver-centred counter-measures. We are not convinced that the resources now devoted to enforcement of sanctions to control driving behaviour (for example, speed limits) that may or may not result in accidents is the best use of the resources available for traffic safety programs. We do not advocate abandoning of prosecutions but rather question whether marginal expenditures might not be better spent on non-punitive techniques. As Albert Reiss has stated, 'What seems needed is greater attention to the role that compliance models, which are central to the strategy of regulatory agencies, can contribute to discretionary choices by police managers and their officers. '8s The area of drunk driving, for example, which will be explored in detail in a later section, would benefit from these mixed strategies of compliance and deterrence. Reiss points out some of the alternatives to arrest for operating a motor vehicle while intoxicated: These alternatives include civil suits for damages arising from drunkenness against bartenders who served the intoxicated person, and paying closer attention to whether bar operators are complying with the law regarding the serving of liquor to intoxicated persons. Civil suits and license revocation for violation may be more effective than arrest of intoxicated persons. Still other modes of coerced compliance are possible, such as patrolling bars that regularly serve intoxicated persons at late hours. Persons appearing to leave intoxicated who begin to drive may be required to take a sobriety test. Failing the test might lead to transportation of the intoxicated person to his or her residence or to a detoxification center as well as impounding of the automobile. The cost of impoundment and a graduated set of penalties for recovery of the vehicle associated with repeat offending may be far more effective than simple arrest and incarceration of the offender pending a court appearance.84 Just as compliance-based techniques appear preferable to overreliance on deterrence-based sanctions, so an epidemiological ap-

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proach, concentrating on environmental factors and taking driving behaviour largely as a given, may prove more effective in many cases than reliance on efforts to change driving behaviour. We also emphasize the often-neglected potential for major reductions in traffic accidents from exposure-limiting counter-measures through licensing and pricing systems. PART ONE: DRIVER-CENTRED COUNTER-MEASURES In this part we examine five general types of driver-centred countermeasure: (i) sanctions (re use of seat-belts, speed limits, and drunk driving); (2) civil liability and insurance; (3) rewards; (4) licensing (including targeting high-risk groups, targeting teenagers, and postlicensing control); and, finally, (5) education (as a requisite for licensing, as a response to post-licensing behaviour, as implemented by employers, and the role of the media). i

Sanctions

Prosecutions are today the most prominent policy instrument used to reduce traffic accidents. Apart from Criminal Code prosecutions, there have been over a million convictions under the Highway Traffic Act each year in Ontario for the past ten years.85 Traffic offences consume a large proportion of police and court resources. A recent British document estimated that road traffic offences occupied 'between 50% and 70% of Magistrates' court time.'86 The same may well be true for lower court judges in Canada.87 This concentration of resources on prosecutions in the traffic area raises the question of whether they are effective in controlling the conduct of drivers and, more important, whether this then leads to fewer accidents. Most Highway Traffic Act offences are based primarily on the concept of deterrence. This appears to be true in most common law jurisdictions. 'Deterrence is in many ways the most important objective of road traffic safety,' states the 1988 British Road Traffic Law Review Report.™ Deterrence comes in two different forms - general and specific (or special) deterrence. Specific deterrence refers to the impact on a specific individual of a penalty or a potential penalty directed against that

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individual. General deterrence refers to the impact of a penalty or a potential penalty on others. Both may be operative in a particular case. A person may be subject to deterrence by a sentence he or she had personally received as well as by knowledge of how others have been dealt with. Deterrence is wider than the fear of state-administered punishment, and many writers advocate that it be understood to include such factors as the stigma of arrest, the jeopardizing of relationships, and the effect of the sanction on future personal goals.89 Deterrence can operate even if the persons on whom it is to operate have limited rather than full rationality. As economist Philip Cook states: The existence of a strong deterrent effect does not require that potential criminals be fully informed or fully rational in their crime decisions ... The prediction that crime is deferrable follows just as readily from an assumption that 10 per cent of criminals are capable of rational decision-making as from an assumption that all potential criminals have that ability. '9° The more rational the actor, the more he or she will be influenced by potential penalties. Virtually everyone has violated the traffic code at one time or another. Thus the traffic offender reflects the general population more than many other classes of offenders do and so is toward the higher end of a rationality scale. To what extent does deterrence work? There are two separate questions that must be examined. The first is whether prosecutions can affect the conduct prohibited. The second and more important is whether deterrence affects the accident rate. No doubt traffic offenders are deterred by the prospect of prosecutions. Most of us slow down when we see a police cruiser at the side of the road and think twice about parking illegally if the potential penalty is relatively high. As the Canadian Sentencing Commission confidently stated in its recent report: 'The weight of the evidence and the exercise of common sense favour the assertion that, taken together, legal sanctions have an overall deterrent effect which is difficult to evaluate precisely.'91 But, how long will deterrence last? Will people speed up again when the police cruiser has been passed, and will they continue to park illegally when the anti-parking blitz has ended? Are there better techniques for controlling conduct than criminal prosecutions? Although the criminal sanction is the principal weapon used to prevent traffic accidents, there is real doubt about its effectiveness in relation to accidents. Would the number of accidents increase if there

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were no enforcement? Certainly the number of traffic citations would go down, but would accidents go up? A 1980 study in Tennessee measured accidents during a police slowdown that followed a period of high enforcement.92 Its conclusion was as follows: 'The present retrospective analysis of police traffic enforcement shows that wide variations in the overall levels of enforcement have no immediate measurable impact on the frequency or severity of traffic accidents.'93 A police slowdown in Metropolitan Toronto in 1985 as a result of a labour dispute warrants more careful investigation than we were able to give to it. In spite of the fact that convictions under the Highway Traffic Act went down from 476,938 in 1984 to 259,767 in 1985,^ the number of fatalities remained about the same: 97 in 1984 and 98 in 1985. However, personal injury accidents went up from 15,325 in 1984 to 17,667 in 1985. A full study of accidents during police slowdowns would give useful insights on the relationship between enforcement and accidents. Did the accident rate rise, for example, after the Toronto Star's banner headline of January 13, 1988: 'Police vote to stop issuing tickets'? A Transport Canada study conducted in Toronto in I97395 looked at the effect of varying levels of police enforcement on driver behaviour and safety at a number of urban intersections. The results cast doubt on the effect of police visibility, finding that while there is an immediate reduction in the number of violations committed by motorists they revert to their earlier patterns when increased enforcement ceases.96 Moreover, the violations most affected by the presence of the police tend to be those of low severity (e.g. signalling a turn) in terms of safety risk,97 compared to the serious risk involved in running a red light. Further, total accidents during the month of increased enforcement were higher than in any other month during the previous or subsequent year. One possible explanation put forward was that police presence encouraged the reporting of accidents.98 In another study, John Gardiner examined traffic law enforcement in four cities in Massachusetts in the 19605 and found wide variations in enforcement policies. His conclusion was that 'no evidence was found to support the theory either that high ticketing will produce a low accident rate ... or that high accident rates will cause the police to adopt a strict ticketing policy.'99 These studies would lead one to view prosecutions with some caution as a technique of control. However, sanctions cannot be too quickly

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dismissed as a control technique. The very existence of a law, as we will see in the discussion of seat-belts, will have a positive effect on compliance, and, as in the case of drinking and driving, the raising of potential penalties may affect attitudes toward the conduct in question. Moreover, some enforcement will further increase levels of compliance by raising the perception of the chance of being caught. Certainly courts believe in the deterrent effect of enforcement. In a recent judgment of the Supreme Court of Canada dealing with the legality of a roadside screening device to detect drunk drivers, Mr Justice Le Dain stated for the court: 'The most effective deterrent is the strong possibility of detection.'100 The question is, how much enforcement is desirable and will the answer vary from subject area to subject area? Let us turn to some of the issues connected with sanctions. One key question is whether it is better to increase the severity of punishments or the rate of prosecution. Increasing certainty of apprehension would seem to be proportionately better than increasing severity of sanctions, both when the punishment is in the form of imprisonment and also when the punishment is a fine.101 With respect to imprisonment, Philip Cook points out that two years in prison would not seem to be twice as bad to the average person as one year's imprisonment. Similarly, laboratory experiments show that people make the choice, if given a choice, of a smaller probability of a proportionately larger fine rather than the converse.I02 A recent study surveyed a sample of about 750 persons in 1982 in Baltimore and reached the same conclusion.103 Various fact situations and consequences were put to those surveyed for a response. The authors concluded that, for predatory crime (e.g. armed robbery, selling drugs, embezzlement), 'increasing the likelihood of a criminal conviction and criminal sanction is likely to be more effective than lengthening prison sentences under a deterrence based punishment scheme.'104 Most persons, it seems, are more concerned about the present than the future. Even if increasing the penalty were in theory more effective than increasing the number of prosecutions, it might not be a cost-effective approach, because the higher the penalty, the more inclined a person will be to contest a prosecution. This could result in a greater number of trials and greater court congestion and thus greater cost to society. To avoid these results the police might become reluctant to charge persons, the crown more willing to plea bargain, and the courts more reluctant to

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impose higher sentences.105 Moreover, too high a penalty (to compensate for a small number of convictions) could be considered unfair by many citizens,106 with resulting disrespect for the law, and might be struck down by the courts as 'cruel and unusual' punishment.107 In a recent Supreme Court of Canada case,108 Mr Justice Lamer stated that although the judge or the legislator can consider general deterrence that goes beyond the particular offender, 'the resulting sentence must not be grossly disproportionate to what the offender deserves.' Further, making the penalty too high would overdeter people (e.g. they might drive too slowly or not at all)109 and could undermine the effectiveness of marginal deterrence (the imposition of increased penalties for acts of increased severity) to help deter engagement in the more serious conduct.110 However, increasing the number of convictions requires more police officers and tends to reduce the stigma of conviction. Finding the right balance between certainty and severity is one of the most important issues in the use of deterrence strategies. A further issue that is raised in the literature111 is the question of celerity, that is, whether swiftness of punishment has a greater deterrent effect than delayed punishment. Certainly the English criminal law in the past believed that speedy justice had the greater deterrent effect. In England in the nineteenth century hangings took place within weeks of the act. Appeals were not permitted in criminal cases in England (with minor exceptions) until 1907. No studies of the effect of 'celerity' in non-laboratory settings112 have come to light.113 (The twelve-hour suspension in Ontario for driving with an alcohol level greater than 0.05 is not a true case of the imposition of a punishment, although it may have this effect.)"4 The more delayed a reward, the less of a strengthening effect it has on the behaviour that earned it. 115 The same is no doubt true for sanctions, with respect to both specific and general deterrence. The target of enforcement, as Christopher Stone suggests,"6 is a further important consideration in deterrence research. Most moving violations under the Highway Traffic Act require that the violator be personally identified and charged. "7 Would compliance be improved if the owner also were subject to prosecution, as he or she is for, say, parking offences? In fairness to the accused, without some proof of guilty knowledge the fine would have to be relatively low"8 and should not be applied to the serious driving offences, but it could apply to moving violations such as speeding and might therefore create addition-

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al pressure on the driver. In order to discourage overloading of trucks, a number of American states have made the shipper and the receiver liable to a fine as well as the driver. 'Drivers are pleased to report,' states one safety expert, 'that in these states there is no longer any pressure to take overloads.'"9 Sanctions usually employed involve fines, imprisonment, or deprivation of licences. Another possible sanction is shame and humiliation, which often accompany a trial. Newspaper publicity, however, can often be very unfair, particularly if the accused is ultimately acquitted. Yet it can be a very effective technique if the severity of the circumstances warrants it.120 Nigel Walker has suggested that persons convicted of certain serious driving offences could be required to hang a red 'H' or hazard plate on their back licence for a period when they drive, both as a warning to other road users and as a deterrent.121 In spite of many studies of deterrence in the past two decades, more research is in fact needed, particularly controlled experiments. Franklin Zimring has pointed out that there are two types of strategies for producing data and insights on deterrence.122 The first and most common type is cross-sectional or time-series studies, that is, studies that look at crime rates in different jurisdictions or in the same jurisdiction over a period of time and compare penalties imposed and crime rates that occur. However, many factors influence crime rates between jurisdictions and over time, and so it is difficult to determine whether the criminal justice system was responsible for the outcome. Moreover, do a high penalty structure and a low crime rate show that deterrence works, or rather, are the penalties high because the crime is infrequent in the community and viewed as serious by society? Further, an observed effect of an intervention may not result from the intervention but may instead represent regression to a normal pattern (regression to the mean). This may explain, to take one well-known example, why Governor Ribicoff's tough crackdown on speeding in Connecticut in 1955 by suspension of licences may have appeared to reduce the number of traffic deaths in the state: the number was simply artificially high in the previous year.123 A more promising approach, as identified by Zimring, is to study 'the impact of changes in law enforcement or punishment policy by closely following what happens after particular policy shifts occur.'124 There have been fewer of these studies. The Kansas City Preventative Patrol Experiment,125 in which intensive preventive police patrolling was

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increased in certain areas of the city, and the Minneapolis Spousal Violence Study,126 in which various forms of police intervention in domestic violence disputes were studied, are examples of this second, more promising approach. A combination of research strategies might prove the most effective. Perhaps one of the best methods of studying deterrence is to examine by a time-series analysis the effects of specific legislative or other changes within one jurisdiction, in comparison to another jurisdiction that has not undergone the same changes. No doubt the best method would be directly to control variables, but this would require that the courts and the police be involved in setting up control groups, and the courts and, to a lesser extent, the police would have serious reservations about doing so. To what extent does the current state of knowledge suggest that deterrence works in relation to three specific areas: seat-belts, speed limits, and drunk driving? Sanctions and Seat-belt Use Seat-belt use varies widely from one jurisdiction to another. It therefore provides a natural laboratory for examining variations in the law and in police and other practices and their likely effect on rates of compliance as well as on accidents and injuries. An understanding of wide variations within and between jurisdictions in seat-belt use may give us more general insights into the deterrent force of the law. Ontario was the first jurisdiction in North America to pass a law making seat-belt use compulsory. The law, passed in December I 975> 127 came into force on I January 1976. It required drivers and passengers in cars equipped with seat-belts to use them. The provincial law had been preceded by a federal law in 1970 requiring installation of belts in all new vehicles.128 Quebec introduced seat-belt legislation eight months after Ontario. Other provinces followed, and there are now compulsory use laws in all provinces. Alberta and Prince Edward Island introduced their laws on i July 1987. The first us state to have a mandatory use law was New York, which passed its law in December 1985. As of December 1986, twenty-seven states had passed laws and two states had repealed laws previously enacted.129 The existence of a seat-belt law will significantly affect seat-belt

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use.I3° In 1986, provinces with such legislation had a use rate of 67.8 per cent, whereas Alberta and Prince Edward Island had a rate of 27.2 per cent. Although the use rate in non-compulsory jurisdictions had been going up over the years, it was still far below the compulsory use jurisdictions. Lest it be thought that Alberta's rates were low because of 'rugged individualism,' Texas had the highest us rate in 1986. Houston had a use rate of 18 per cent before Texan legislation and is now at almost 70 per cent.131 And Alberta's rate has risen to 74.3 per cent in 1987, the year after legislation was passed, and to 82.5 per cent in I988.132 This supports Jonah and Lawson's claim that use rates are not culturally dictated.133 Before Ontario introduced its legislation, the use rate, even with considerable propaganda, was below 20 per cent. It went up to 77 per cent after the law was enacted.134 Nova Scotia's use rate rose from 20 per cent to 80 per cent after legislation in I985.135 England's rates remained at about 30 per cent from 1979 to 1982, in spite of large-scale education campaigns which cost approximately £2 million annually.I3