In the U.S. criminal courts must throw out improperly obtained evidence. A key justification for this practice is that it is that it deters law-enforcement misconduct. This paper uses principal-agent theory to suggest that, contrary to economic and other conventional wisdom, if the exclusionary rule is flawed it is because it deters inadequately rather than excessively. Principles of an optimal compensation scheme for law-enforcement personnel are offered along with evidence suggesting that actual compensation does not reflect them. The rule may thus fail to sufficiently prevent misconduct even as it increases the costs from lost convictions. (JEL K14, K42, D82) Copyright 1999 Western Economic Association International.
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