Undercover operations are an essential component of effective law enforcement in combating certain types of crimes. But the extreme instances of government involvement in criminal enterprises raise significant policy concerns. Such tactics can lead to criminal activity that would not have otherwise occurred. Undercover operations are socially desirable only where they aid law enforcement in apprehending those persons who pose a current threat of crime to society. On the other hand, where undercover operations ensnare persons who would not have engaged in criminal activity absent the government\'s solicitation, government resources are squandered. Where no threat of harm exists, law enforcement has no legitimate interest. The entrapment defense is the judicial instrument created to address this possibility of government-manufactured crime.In this note, the author explores the relationship between economic analysis and the entrapment defense, focusing on the entrapment defense in the federal courts. The note begins by examining the Supreme Court\'s treatment of the entrapment defense and argues that causation is the underlying principle driving the decisions of the Court. Next, the note develops an economic model for the defense, using principles derived from an examination of the cost-benefit analysis of the police and the cost-benefit analysis of the rational decisionmaker contemplating criminal activity. The economic model is then compared to the existing federal-court approach. The note then goes on to resolve a current split in the federal circuits relating to the concept of positional predisposition, using principles derived from the economic model. Finally, informed by economic analysis, the note proposes a sliding-scale approach to the entrapment defense, employable within the existing contours of the federal-court approach. In addition to the economic justification, the author finds support for this proposal in previous Supreme Court decisions.\"The function of law enforcement is the prevention and the apprehension of criminals. Manifestly that function does not include the manufacturing of crime.\"
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