Lecture Issues in economics today - Chapter 24

Learning objectives of this chapter include: The elasticity of demand, the determinants of elasticity, elasticity and total revenue, the elasticity of supply, tax incidence.

Chapter 24

The Economics of Crime

Chapter Outline

• WHO COMMITS CRIME AND WHY

• THE RATIONAL CRIMINAL MODEL

• THE COSTS OF CRIME

• OPTIMAL SPENDING ON CRIME

CONTROL

Who Commits Crime and Why

• Disproportionately to their percentage in the population crime is committed by

– Men – The young – The poor – The socially disadvantaged

Sources of Crime Statistics

• Police reports

– Potentially subject to police biases against minorities.

• Victim accounts

– Not subject to bias because it is in the interest of a victim to give an accurate description of the perpetrator

The Result

• Whether we look at crime rates from

police reports or from victim accounts the result is the same:

– minorities commit more crime than would

be accounted for by their 24% of the population.

The Rational Criminal Model

• Becker’s rational criminal model (RCM)

assumes that a criminal’s choice to commit a crime is a rational one comparing the benefits

of the crime with the uncertain outcome of success or jail.

• The model looks at crime like an investment: take a risk, get a high expected return; play it safe, get a low expected return.

Implications of the RCM

• People with high legally-derived income are less likely to commit crime

• The greater the punishment the less

likely the criminal is to commit crime

• The more likely the criminal is to be

caught the less likely they are to commit crime

Evidence in favor of the RCM

• Less than half of the prison population

has a high school degree

• 33% of criminals were not working

when they committed their crime

• Crime rose during the 1980s as real

income for the poor was stagnant or falling and fell during the 1990s when it was rising

• Crime rose during the 1960s when real income for the poor was rising

• Crime was much lower during the

1930s when incomes were quite low because of the depression

Evidence against the RCM

Challenges to the Basic Assumptions of the RCM

• While property and drug crimes can be seen through the expected

“cost-benefit” lens, others can not:

– e.g rape, spousal abuse, assault, school shootings

– murder for hire is classic RCM but generally murder is not for monetary gain.

Costs of Crime

• $93 billion is currently spent on the

criminal justice system (police, courts and prisons)

• There are nearly 14 million crimes

– 1.8 million violent – 12 million non-violent – Approximately 14 million more are

How Much Does an Average

Crime Cost

• Types of costs

– Items taken or damaged – Lost income of victims – Psychological damage or “pain and suffering”

• Costs per crime estimates

– Ignoring Pain and Suffering $500 – Including Pain and Suffering $2,000-$3,000

Pain and Suffering

Calculations

• How much is pain and suffering worth?

• Do you look at

– Costs of psychological care?

– Damage awards from jury trials?

• Can you calculate a dollar value of pain and suffering

– to the spouse of a murder victim

How Much Crime Does an Average Criminal Commit

• Estimates from criminologists vary from

a 12 to 180

• Economists use a conservative 15 to 20

to estimate the usefulness of crime control

The Net Result on the Question

of How Much Crime Costs

• At 15 crimes per year and $500 per

crime each criminal commits $7,500 worth of crime each year he is not in jail

• At 20 crimes per year and $3,000 per

crime each criminal commits $60,000 worth of crime each year he is not in

Optimal Spending on Crime

Control

• While the “average” criminal may commit

$60,000 worth of crime and it costs only

$22,000 per year to keep them in prison, that

is not what an economist would use to make the case.

• An economist would look at the benefit of

locking up one additional criminal and compare that to the marginal cost of doing so

Are the Right People in Jail?

• More than half of the prison population

in many states is incarcerated for drug crimes

• Does it make sense to have a

nonviolent person in prison?

What Laws Should we Rigorously Enforce

• The marginal benefit of arresting all

murderers or rapists is greater than the marginal benefit of arresting all recreational drug users and jaywalkers.

• The marginal cost of arresting only murders

and rapists is less than the marginal cost of arresting all drug users and jaywalkers.

• Economists compare the marginal cost and

the marginal benefit of targeting particular

Marginal Cost and Marginal

Benefit

Marginal Costs

MB

What is the Optimal Sentence?

• Death Penalty vs Life in Prison without

Parole

– Death Penalty Costs

• Present value of extra adjudication

• Dollar value of executing the innocent – Life without Parole Costs

• Present value of housing costs

• Present value of medical costs for an aged inmate.

– Economists generally agree that in monetary terms, the death penalty costs more than life in prison.

• Length of Sentence

– As sentences get longer