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Fighting Crime

Chapter 20

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America's most unsafe Cities• http://www.mibazaar.com/unsafecities/ • In 2005, St. Louis, Missouri (population 352,572)

was the deadliest city in America, at 2405.5 violent crimes per 100,000.

• Brick Township, New Jersey (population 7,119) ranked the safest city for having 55.9 violent crimes per 100,000. The overall violent crime rate in the United States was 469.2 per 100,000.

• Why do crime rates differ?

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Reported Crimes per 100,000 Persons, 2005

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Crime statistics

• Violent crime– Murders– Non-negligent

manslaughter– Forcible rape– Robberies – Aggravated assault

• Property Crime– Burglaries– Larceny– Theft– Motor vehicle theft

• FBI’s Uniform Crime Reports tracks reported crime

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Underreported crime

• Victims—marginal benefit < marginal cost– They lack trust in police– They hold themselves partly responsible– Crime not serious enough– Serial crime victims

• Police– Fewer crimes reported—crime rates reduced– Only most serious act is reported for each

incident

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Crime statistics

• National incident-based reporting system (NIBRS) – FBI– Still under construction

• National Crime Victimization Survey (NCVS)– Bureau of Justice Statistics– Telephone interviews of ~50,000 households

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Defining crime

• Against persons: – Homicide, rape, kidnapping, assault

• Against property:– Theft, larceny, burglary, vandalism, arson,

embezzlement, fraud• Against the State:

– Treason, counterfeiting, terrorism, tax fraud, regulatory violations, failure to pay parking meters, tearing labels off mattress …

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Defining crime

• Against rent-seekers:– Selling lemons that are too small, private

delivery of Christmas cards or letters, selling gasoline below statutory minimum prices

• Against one’s self: (victimless crimes)– Prostitution, consumption of illegal

substances, sodomy

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Economic theory of crime

• Rational choice theory (Becker 1968)• Labor supply question: • People choose crime if perceived marginal

benefit > perceived marginal cost• Criminals have different patterns of

benefits and costs than noncriminals• Traditionally used to explain property

crime or selling illegal goods.

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Marginal benefit to criminal

• Marginal benefit curve slopes downward:• Criminals rank crimes by expected pay-off

(rate of return per unit of effort) and do them in order.

• As supply of stolen goods increases, the willingness-to-pay by the fence diminishes.

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Marginal cost curve slopes upward

• Increased quantity of crimes requires more resources

• Same Method of Operation increases probability of being caught

• Costs include internal and external deterrents– Internal deterrents: guilt, self-restraint– External deterrents:

• Probability of getting caught probability of being arrested probability of being convicted probability of being sentenced

• Urban crime rates high because probability of recognition and arrest is lower

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Market for crime (criminal’s perspective)

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Tracy Pat

Expected benefits from burglary $10,000 $10,000

a) Expected probability of apprehension and conviction

0.30 0.30

b) Expected length of sentence served if convicted 2 years 2 years

c) Earnings/year (legitimate) $30,000 $10,000

Expected costs (a b c) $18,000 $6,000

Expected net benefits (Expected benefits−expected costs)

−$8,000 +$4,000

Table 20–1. Expected marginal benefits and marginal costs of committing a burglary

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Competing Theories of Crime

• “Bad souls” (pre 1700s)• Deterrence theory: Jeremy Bentham

(1789)– Hedonic (Hedonistic) calculus– Age of Enlightenment– Basis of rational choice theory

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Sociological Theories of Crime

• Sociological explanation: Income inequality and envy are the root of crime– Relative deprivation: Envy stems from unfair

disadvantage– Strain: Envy because of frustration and failure– Social disorganization: Weak methods of

social control. Feelings of alienation and anomie cause higher urban crime rates

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Biology and crime• Lombroso: criminals are an accident of evolution

– Nature causes criminality—not nurture, not free choice

– Criminals identified by large jaws, high cheekbones, and bony arches above deep-set eyes.

– Action-loving, aggressive personalities needing little sleep, easy to anger

– Chronic need for excitement due to genetic differences in their autonomic nervous systems.

• Extra XYY chromosome found in large proportion of prisoners (rather than XY); dyslogia (difficulty with verbal expression)

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Biology and crime

• Complications during birth; neo-natal problems

• Twins studies• Biology: predisposition or predestination?• Solution for crime reduction based on

biological theories: (draconian)

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Psychological theories

• Neo-Freudians: Childhood without love– Too much or not enough discipline – Broken home

• Media Violence (but consider Japanese films)

• Yochelson and Samenow: Mentally ill criminals adopted the tag to avoid jail.

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Touch of Methodology

• What to believe?• Good theories

– Internally consistent and logical– More consistent with facts than rival theories– Consistent with a general theory of behavior

• Economic theory of optimization:– People engage in an activity up to the point

where perceived marginal benefits are greater than perceived marginal costs

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Social costs of crime

• More than just property values estimated by hedonics

• Cost to victims: (Cohen, 1990)– Direct out of pocket costs

• Lost wages, medical expenses, stolen property– Risk of death (probability of death multiplied

by value of life)– Costs of pain, suffering and fear

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Crime Direct Losses Pain and Suffering Risk of Death Total

Rape $8,530 $80,483 $5,321 $94,335

Robbery $2,058 $13,781 $7,429 $23,269

Assault $780 $9,092 $12,351 $22,223

Car Theft $5,670 $0 $107 $5,777

Burglary $1,735 $586 $214 $2,535

Larceny

Personal $331 $0 $4 $334

Household $320 $0 $0 $320

Source: Cohen (1990). Reproduced with permission of the publisher. Journal is available at http://www.tandf.co.uk/journals/titles/10799893.asp.

Table 20–2. The Cost of Crime to Each Victim, including Attempted Crimes (2005 dollars)

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Social costs of crime

• Crime is random, regressive tax• Potential victims have low incentives to

accumulate personal property• Crime decreases GDP• Large proportion of homeless are

unemployable ex-felons—survive only in illegal markets

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Victim’s viewpoint

• Civil law settles disagreements among private parties. – Plaintiff initiates an action against defendant.

• Criminal law deals with a wrong against “the state.” – Only the state can prosecute, arrest, and punish. The

immediate victim or family can only pursue legal action in civil court.

• As government’s role increases in importance, victims lose importance.

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Crime victims

• Potential victims place themselves under house-arrest while criminals run free

• Voluntary crime watch groups increase cost of crime to criminals

• Investment in private security systems – Marginal Benefit = decreased probability of being

victimized x anticipated value of losses – Potential victims first invest in activity that brings

greatest marginal benefit per $ (per effort)

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Market for Crime Protection (victim’s viewpoint)

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Fear of victimization

• Fear – Perceived vulnerability– Previous experience as witness or as victim– Social environment (Don’t snitch mentality)– Quality of support networks– Attitudes toward police– Self-defense capabilities– Stereotypes of individuals or groups

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Crimes of Passion

• Recently economists use rational choice theory to analyze crimes of passion– Hate crimes (Glaeser, 2005) – Riots (DiPasquale and Glaeser, 1998) – Domestic violence (Witte, 1996)– Murder (Donohue and Levitt, 2001) for one

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Economic theory of hate

• Rational choice model Political gains determine the supply of hatred. Time spent hearing about the past (or future) atrocities of the offending group increases supply.

• The demand for hatred (listen to hate speech )– Messages seem to contain potentially useful

information about hostile groups– Messages often subsidized, attention-grabbing.

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Economic theory of hate

• Hate crimes are committed by those who consider themselves to be victims when minority groups threaten the superiority of their social status.

• Individual hatred becomes collective if:– members of the “victim’s” group must identify

with the victim, and – must decide that all members of the targeted

group are collectively guilty.

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Economic theory of hate• The rational choice approach assumes that

individuals who commit hate crimes maximize a two-good utility function:– hate behavior– a composite of all other goods.

• The utility functions of the haters depend negatively on the well-being of the target group

• Haters are happy to reduce their own consumption of the composite goods if the consumption of their “target” is reduced even more.

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How to counter hate crimes?

• Build a case to hate the haters. • Based on esteem theory (Dharmapala and

McAdams, 2005): – The opinion of others is important. Publicity allows the

perpetrator to achieve the desired fame. – The greater the probability that a crime will be

publicized, the higher will be the potential offender’s expected utility from the crime.

• Thus, restrictions on reporting hate crimes may reduce the incentives to commit these crimes.

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Economic Theory of Riots• DiPasquale and Glaeser (1998) Only the private

costs and benefits determine whether individuals participate.

• The benefits of the group (of rioters) are important only because of a link between them and private benefits to each rioter. – Stolen goods and merchandise,– Political benefits internalized by individuals within the

group• Costs:

– The opportunity costs of time – Likely costs of punishment

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Economic Theory of Riots• Marginal benefit curve for rioting slopes

downward: a larger number of rioters reduces the benefits that the marginal rioter receives from joining in.

• Marginal cost: – few rioters: marginal costs are constant and higher

than the benefits because it is easier to be identified and apprehended.

– Because there is protection in numbers, marginal cost curve mainly slopes downward

• the marginal rioter has a lower risk of being arrested because of anonymity and congestion for law enforcement.

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The costs and benefits of rioting

Q1Q2

A

B

C

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Three possible equilibria• Point A: No riot. Probability of being arrested is

large, so MC>MB for the individual. • Point B: Unstable equilibrium (since MC cuts MB

from above). Moderate probability of being apprehended. Minimum size of riot. One less person—convergence to A. One more, convergence to C.

• Point C: Stable equilibrium requires a large number of rioters who each have a low probability of being arrested.

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Domestic Violence

• Assailants and victims both engage in benefit/cost analysis

• Assailants: – exercise control over their partner’s behavior – lack self-esteem– cling to traditional gender roles

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Domestic Violence

• Victims: cost of reporting may mean incarcerating family breadwinner

• Increase costs to the batterer exist when women– have a legal support network– have higher incomes or work outside the

home. • Domestic violence declines as costs to

assailant increase.

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Murder

• Deterred by– Capital punishment– Crack down on small crimes (Broken Window

Hypothesis)– Abortion (Donohue and Levitt, 2001)

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Broken Window Hypothesis

• Hierarchy of crime in a neighborhood – Graffiti, to – Vandalism, to– Murder.

• If broken windows are not fixed, vandals continue to break windows.

• If nothing is repaired, law-abiding citizens abandon the street to troublemakers.

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Abortion affects future murder rates

• Very controversial!• Legalized abortion decreased adolescent

childbearing and illegitimate births • Unwanted, neglected children have high

probability of becoming criminals. Legalized abortion decreases the number of unwanted births.

• Twenty years after abortions were legalized, criminal activity significantly declined (Trend found in U.S., Canada, Australia)

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Victimless Crimes

• People willingly become involved in activities that others think are harmful or immoral. – Prostitution (Edlund and Korn, 2002)– Rational addiction (Becker and Murphy, 1988)

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Prostitution

• Illegal, tolerated, legal: depends on jurisdiction • Supply of prostitutes analyzed similar to the

supply of labor for any other occupation. • If men do not want to marry former prostitutes,

then the opportunity cost to the woman is the probability that a potential spouse will find out about her background.

• The compensating wage differential falls with the probability of being discovered.

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Prostitution

• Both supply and demand for prostitutes is sensitive to the risk of discovery and social stigma associated with arrest and conviction.

• Neighborhoods increase marginal costs by “name and shame” techniques.

• Districts that implement zero-tolerance initiatives do nothing but change the location of the market.

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Mood modifying substances

• Arguments for prohibition– Irrational consumers

• not well informed, or • they are myopic.

– Negative externalities• Not victimless crime: others are harmed by the

consumption of the good.

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Mood modifying substances

• Arguments against prohibition– Consumption of an addictive good is rational. – Prohibition violates freedom of choice. – How far should government go to dictate

healthy behavior?

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Rational Addiction

• Addiction is defined as a habit where past consumption influences the utility from present consumption. – Positive and negative addictions

• The problem with harmful addiction is that the actions (revealed preferences) of addicts do not match their words (stated preferences).

• Economic theory is grounded in free choice, so can it explain addictive behavior?

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Rational Addiction• Becker and Murphy (1988)• Addictive behavior is rational, but more complex:

two components:– reinforcement (past consumption)– tolerance

• Current utility depends on – current consumption of the addictive good, – current consumption of a nonaddictive good and – the stock of the addictive capital (the summation of all

the quantities of the addictive good previously consumed)

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Rational Addiction

• Tolerance requires ever greater quantities to achieve the same level of utility.

• Larger amounts consumed today decrease future satisfaction because it will increase the necessary amount of future consumption

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Rational Addiction

• Reinforcement: greater past consumption increases the desire for present consumption.

• Reinforcement requires that today’s pleasure must outweigh the harm they expect in the future.

• People who become addicted heavily discount the future.

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Rational Addiction

• Total cost of an addictive good is the sum of– The good’s price– The value of future adverse effects on health

and well-being. • Increasing the current monetary price or

increasing the amount of information about future hazards reduces both short-run and long-run consumption.

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Rational Addiction

• Myopic consumers value the present more than they value the future and respond more to changes in the monetary price than to potential future health problems.

• As people age or as incomes rise, they are more concerned about future health.

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Would prohibition work?

• In economic terms, strict prohibition may be warranted if the external marginal costs are so great that no consumption can be tolerated– If marginal cost starts at limit price of demand curve

• If the major externality is social disapproval …– Compare value of social disapproval to value of

increased utility of users of substances.– Interdependent utility functions– Comparing interpersonal utilities (See Chapter 16)

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Externality Analysis of Mood Modifying Substances

Price

$10

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Should We Legalize Drugs?

• War on drugs isn’t working– Relative inelasticity of demand– Decrease supply– Prices increase substantially

• Benefit to surviving dealers– Quantity decreases by just a little– Desperate addicts turn to more violent crime to

get money– High cost of prosecuting drug-related crimes

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Effect of Supply-Based Drug Policies

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Should We Legalize Drugs?

• Legalize drugs:– Retail price will drop, quantity demanded will increase– Arguments for prohibition apply to alcohol and

cigarettes, and Prohibition did not work.– Effect on demand?

• May increase because good is now legal• May decrease because legal good loses “rebel status”

– Before opium was made illegal in the US, the proportion of opium addicts was negligible. Why would the proportion differ now?

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Organized Crime

• Organized crime groups – quasi-governments, similar to predatory

states, – emerge from absence of state enforcement

(geographic, social, ethnic, ineffective or on illegal substances)

– Follow a traditional hierarchical organization. – Urban gangs are mercenaries that offer

protection to their “clients”

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Organized Crime

• Monopolizes criminal activity: – Quantity of crime (number of victims)

decreases, – Severity of crime increases to drive out petty

(perfectly competitive) criminals

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Organized Crime and the Market for Crime

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Crime reduction

• Cost of doing crime is function of– probability of apprehension x probability of

conviction x probability of punishment • Optimal crime prevention budget:

$1 . . . ofEffect

$1labs crime ofEffect

$1patrols ofEffect

$1jails ofEffect

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Deterrence

• Specific deterrence acts on individual. Incarcerated individuals cannot easily commit crimes on the outside from their prison cell.

• General deterrence acts on all potential criminals who re-estimate the probabilities of getting caught and punished.

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Philosophies of Punishment• Pragmatism: proposes that society should

choose the most efficient and least expensive means possible.

• Vengeance and retribution are required for justice Concept is based on “an eye for an eye” philosophy. Punishment is consolation for the victim.

• Rehabilitation therapy will alter the internal deterrents of the criminal so much that the marginal cost of committing crime becomes prohibitive. Person must agree that he or she has antisocial behavior.