Abstract This paper explores the effects of public enforcement, in general, and punishment, in particular, on crime levels if offenders can engage in avoidance activities. Avoidance reduces the probability or magnitude of punishment. In general, offenders can reduce their expected punishment either by substituting legal activities for criminal activities (the deterrence effect) or by increasing avoidance activities. This paper shows that increasing the direct costs of crime – by either increasing punishment or enforcement efforts – does not necessarily deter criminal activity and may actually trigger increased crime if avoidance is possible. Furthermore, this paper shows that increasing the opportunity costs of crime (e.g. by subsidizing legal alternatives or through educational and vocational programs) reduces both crime and avoidance and thus, in this respect, is advantageous. The conditions for these outcomes are identified, the economic mechanisms are explained, and an underlying intuitive approach for these results is proposed.