The master's thesis deals with the economic analysis of criminal law and it's core problems. It deals with questions like: does punishment deter crime, are criminals really rational and think about the punishment before- hand, can criminal policy make changes in crime rates and what is the optimal criminal policy. First the thesis introduces the rational crime theory, then it explains what should be the optimal amount of crime deterrence, which are the most most efficient punishments, what damages and costs crime causes and how big is the amount of costs that comes from fighting against crime. Towards the end the thesis shows results from various studies that have researched the effect of change in probability of apprehension and punishment in crime rates. The studies have mixed result. The most consistent result in most of the studies is that a change in the probability of apprehension does have an effect on crime rates. At the end the thesis presents a small study that explains what should be the optimal criminal policy in the USA like and it also shows data on whether or not changes in apprehension and punishment, have had an effect on crime rates in Slovenia. Both changes show some effects, but the effect of punishment is bigger.