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Transcript of Crime1
Economics of Crime
Victoria Vernon, Ph.D.Empire State College
Examples of economic questions in this course:
• Are we getting our money’s worth for the dollars we spend on police, jails, and prisons?
• If crime is going down, why are we devoting more resources to its control?
• If drug offenders are mostly non-violent, why do we send them to state prison?
• Legalize drugs?
• Death penalty?
Outline for Today
• What is Economics?• What is crime?• Rational criminals• How much crime is there? • What is the economic impact of crime?
• Graphs
• Correlation vs causal link
What is Economics?Economics studies • how people make CHOICES• allocation of scarce resources among alternative
uses • how do we allocate SCARCE RESOURCES to
satisfy the most pressing of our UNLIMITED WANTS?
The science of decision-making
INDIVIDUAL’S RESOURCES– Money– Time– Effort
SOCIETY’S RESOURCES– Land– Labor– Capital– Entrepreneurial abilities
How do we make choices? (Economics Philosophy)
• People are SELFISH– Maximize our own joy, happiness– UTILITY=
subjective measure of joy, pleasure, happiness, satisfaction from consuming goods/services
• People are RATIONAL– compare COSTS and BENEFITS of alternatives,Examples of decisions:
Buying a cup of coffeeGoing to collegeCommitting a crime
• People respond to incentives• All choices involve OPPORTUNITY COSTS
– the next best alternative foregone
Rational decision example: Go to college?
• Benefits:–higher future income: $100,000– lower insurance rates: $5,000–better health: $15,000–other ?
Total benefits : $120,000
Benefits> Costs
• Costs:– tuition, books: $40,000– lost income: $60,000
Total cost: $100,000
Rational decision example: Steel a car?
• Benefits (expected):
Benefits > Costs ?
• Costs (expected):
choice
Work and no violence
Work andbrawl in bars
expect $24,000/yr
Apprehended: $22,000lose 1 month in court andjail
0.1
0.9 Not apprehended$24,000
Expected income: 0.1*$22,000 + 0.9*$24,000 = $23,800Expected cost: $200Compare benefit and cost.
Rational choice: brawl in bars?
What is Crime? Illegal activity.• Motivation: self-interest, greed
– Street Crimes: robbery, burglary, auto theft, larceny
– White Collar: embezzlement, tax evasion, investment fraud, check fraud, telephone fraud, insider trading
– Status Offenses: runaway, truant, vagrant, beyond control of parents
– Black Market: gambling, prostitution, drugs
• Motivation: hate, rage– Street Crimes: homicide, aggravated assault, rape
– Crimes Against Public Order: vandalism, terrorism
– Hate Crimes: Columbine High, dragging death
Crime? • Selling/buying human organs• Discrimination of minorities• Collusive business agreements, monopolies• Breach of contract• Breaking Food and Drug Admin regulations• Spam emails, hackers attacks• File sharing• Jaywalking• Illegal parking• Racial profiling
[
Serious violent crimes : rape, robbery, aggravated assault, and homicide
Bureau of Justice Statistics, http://ojp.usdoj.gov/bjs/glance/cv2.htm
Property crimes: burglary, theft, motor vehicle theft.
Violent crimes : rape/sexual assault, robbery, aggravated and simple assault.
Property crimes : household burglary, theft, and motor vehicle theft.Bureau of Justice Statistics,
http://ojp.usdoj.gov/bjs/glance/reportingtype.htm
How is Crime Measured
• Victimization Surveys of Households– U S Dept of Justice, Bureau of Justice
Statistics, Criminal Victimization
• Citizen (Victim) Reports to Police– U S Dept of Justice, FBI, Uniform Crime
Reports
2007: 7.3 million people were under correctional supervision including:
Probation - court ordered community supervision of offenders by probation agency.
Prison - confinement in a State or Federal facility to serve a sentence of >1 year.
Jail - confinement in a local jail while pending trial, serving a sentence <1 year.
Parole - community supervision after a period of incarceration.
February 28, 2008
Public Sector
Health
Safety
Civics
Education
Victim’s Income
Thief’sIncome
Economic analysis of crime
• Crime as income redistribution– Involuntary transfer from
victim to thief
Victim’s Income
Thief’sIncome
$6,000
$6,000
Income Distribution
$12,000
Total or Social Income Line:Thief’s + Victim’s Income
$12,000
Income Redistribution$9,000
$3,000
•Crime is income redistribution–Robin Hood: Take from the rich and give to the poor–impact on social welfare: good or bad?
Victim’s Income
Thief’sIncome
$6,000
$6,000
Income Distribution
$12,000Total or Social Income Line:Thief’s + Victim’s Income
$12,000
Income Redistribution$9,000
$3,000 $11,000
$1,000 socialcost of defense
$11,000
Loss of resources spent on defense
What is the nature of crime?
• Crime is income redistribution
• Crime is a dead-weight loss for society– Loss of resources spent on defense
• protection of homes, cars, bicycles
– These resources could be spent on goods and services
– Victim has less incentive to be productive– The impact on social welfare
• Unambiguously bad
• Criminal does not take into account impact on society
Total Costs of Crime for Society• Goods and services (tangible)
– Value of property destroyed– Time and resources spent by criminal– Medical /health services for victims– Police and fire services– Cost of jail time for taxpayers– Loss of productivity and wages by victim • Quality of life (psychic) by victim, family, friends• Loss to bystanders, third parties and society (negative
externalities)– Cost of crime prevention activities: locks, guards,
alarms, insurance, etc– Spending on criminal justice system– Taxes, property values, migration from neighborhoods– Moral climate of society
Choice
Legal work
Illegal work
Unemployed (fail)
Employed (succeed)
Apprehended (fail)
Not Apprehended(succeed)
Example of rational choice:
Legal Work or Illegal Work?
Expected legal Income = 0.9*$12,000 = $10,800
Legal Work or Illegal Work? Choice with Uncertain Outcomes
Choice
Legal work
Illegal work
Unemployed (fail)
Employed (succeed)
Apprehended (fail)
Not Apprehended(succeed)
0.1
0.9
$0
$12,000/yr
0.2
0.8
$0
$14,000/yr
Expected illegal income = 0.8*$14,000 = $11,200
Expected legal Income = 0.95*$12,000 = $11,400Choice
Legal work
Illegal work
Unemployed (fail)
Employed (succeed)
Apprehended (fail)
Not Apprehended(succeed)
0.1
0.9
$0
$12,000/yr
0.2
0.8
$0
$14,000/yr
Expected illegal income = 0.8*$14,000 = $11,200
0.05
0.95
Reduce crime: Maintain a full-employment economy
Expected legal Income = 0.9*$12,000 = $10,800Choice
Legal work
Illegal work
Unemployed (fail)
Employed (succeed)
Apprehended (fail)
Not Apprehended(succeed)
0.1
0.9
$0
$12,000/yr
0.2
0.8
$0
$14,000/yr
Expected illegal income = 0.7*$14,000 = $9,800
0.3
0.7
Reduce crime: Maintain Effective Criminal Justice System– keep the probability of apprehension high
Expected legal Income = 0.9*$12,000 = $10,800Choice
Legal work
Illegal work
Unemployed (fail)
Employed (succeed)
Apprehended (fail)
Not Apprehended(succeed)
0.1
0.9
$0
$12,000/yr
0.2
0.8
-$3,000 (fine)
$14,000/yr
Expected illegal income = 0.8*$14,000 - 0.2*$3,000 = $10,600
$0
Reduce crime: Punish the criminal– make crime less attractive
Summary• Crime is an economic problem
– loss of resources(dead weight loss) from private and public defense
• Your economic status affects your probable behavior: work or crime
• Earning power affects your probable behavior• Social Measures to Reduce Crime
– Maintain a full-employment economy– Maintain an Effective Criminal Justice System
• keep the probability of apprehension high– Punish the criminal
• make crime less attractive