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McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved Chapter 12 Crime
©2009 The McGraw-Hill Companies, All Rights Reserved12-2 Economic approach: Criminals respond to incentives Crime reduced by traditional crime-fighting resources (police, prisons) Crime reduced by increasing returns to lawful activities (schools) Introduction to Crime
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©2009 The McGraw-Hill Companies, All Rights Reserved12-6 Economics of double parking 50-50 chance of gaining $44 or losing $36 Who will take the risk? People generally risk averse: Need more than +$44 to offset risk of -$36 People differ in aversion to anti-social actions--anguish cost The Rational Criminal
©2009 The McGraw-Hill Companies, All Rights Reserved12-7 Model of Rational Criminal Risk Aversion: Utility = Square Root (Income) Commit crime if expected utility higher than certain lawful utility
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©2009 The McGraw-Hill Companies, All Rights Reserved12-9 Increase probability of prison (probability of failure) to 0.75 Lengthen prison term to 0.51: Decrease failure utility to 7 utils Decrease the loot to $21: Decrease success utility to 11 utils Preventing Crime
©2009 The McGraw-Hill Companies, All Rights Reserved12-10 Income = $400; lawful utility = 20 utils High-income: Same loot but four times the opportunity cost EU(crime) = 18.5 utils = 0.50 U(444) + 0.50 U(256) Implication: Lower crime among high-income people Income and Crime: Column 5 in Table 12-3
©2009 The McGraw-Hill Companies, All Rights Reserved12-11 Most people averse to committing anti-social acts like crime Low probability of prison = 0.25 EU(crime) =11 utils = 0.75 U(144) + 0.25 U(64) EU(crime) > Lawful utility, so commit crime If anguish cost = 2 utils, expected utility of crime = 9 utils < Lawful utility Morality & Anguish Costs: Column 6 of Table 12-3
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©2009 The McGraw-Hill Companies, All Rights Reserved12-14 Elasticity of supply w.r.t. Probability of prison = -0.30 Elasticity of supply w.r.t. Arrest ratio = -0.30 Elasticity of supply w.r.t. Number of police = -0.40 to -0.50 Empirical Evidence: Crime Supply Elasticities
©2009 The McGraw-Hill Companies, All Rights Reserved12-15 Longer prison term increases crime cost, shifting MC (supply) curve upward Elasticity close to zero Longer prison term causes offsetting changes Harden criminal: lower anguish cost shifts MC (supply) shifts downward Prison schooling: skill acquisition shifts MC (supply) downward Increasing the Severity of Punishment
©2009 The McGraw-Hill Companies, All Rights Reserved12-16 Education increases wages, decreasing crime College wage premium = 100% High-school graduation wage premium = 50% Education and Crime
©2009 The McGraw-Hill Companies, All Rights Reserved12-17 Studies of link between unemployment rate and crime Weak relationship between crime and overall unemployment rate Teenage crime (first-time offenders) sensitive to unemployment rate Studies of link between lawful wages and crime Increase in lawful wage increases opportunity cost, shifting MC (supply) upward Low-skilled workers: Elasticity (crime, wage) between -1.0 and - 2.0 Improving job prospects for low-skilled workers reduces crime Lawful Opportunities and Crime
©2009 The McGraw-Hill Companies, All Rights Reserved12-18 Education-Crime Link for High-School Education Additional year of HS decreases crime participation rate: Reduction of 0.10 percentage points for whites; 0.40 pct points for blacks Graduation decreases crime participation rates of white males: 9% for violent crime; 5% for drug crime; 10% for property crime Elasticity (Arrest rate, Graduation rate) = -2.0 (violent) and -1.30 (motor vehicle) Effects of preventing a dropout Cost per year of schooling = $6,000 Reduction in crime = $1,600 per year for rest of work/crime life
©2009 The McGraw-Hill Companies, All Rights Reserved12-19 Elasticity of crime rate with respect to size = 0.15 More loot (25% of difference) Lower probability of arrest (15% of difference): Table 12-4 More female-headed households (50% of difference) Why More Crime in Big Cities?
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©2009 The McGraw-Hill Companies, All Rights Reserved12-23 Crime rates higher among children born to reluctant parents Abortion decreased number of unwanted births Availability of abortion in 1970s reduced the number of people maturing in crime-prone years in 1990s--a favorable demographic change Cut crime rate by 10%; responsible for one third of crime drop Caution: Other studies show smaller effect Role of Legalized Abortion
©2009 The McGraw-Hill Companies, All Rights Reserved12-24 How much crime should we choose? Victim Costs Includes costs of injury, recovery time, lost property Estimated cost per victim: $370 (larceny), $1,500 (burglary), $4,000 (auto theft), $13,000 (armed robbery), $15,000 (assault) Are some crimes less expensive to experience than to prevent? The Optimal Amount of Crime
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©2009 The McGraw-Hill Companies, All Rights Reserved12-26 Criminals have options, and alternative crimes are substitutes Equilibrium: Equal net return for different crimes Change in cost of one crime causes substitution toward other crimes Crime Substitution and Marginal Deterrence
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©2009 The McGraw-Hill Companies, All Rights Reserved12-30 Victim cost of robbery is 8.7 times the cost of burglary Break even in social cost: 8.7 fewer burglaries offset each additional robbery Example in Figure 12-9: 3 fewer burglaries for each additional robbery Implications for the Social Cost of Crime
©2009 The McGraw-Hill Companies, All Rights Reserved12-31 Penalty for burglary less than penalty for armed robbery Policy objective: Develop penalty menu to generate optimum crime mix Should the Punishment Fit the Crime?
©2009 The McGraw-Hill Companies, All Rights Reserved12-32 Overall elasticity of crime w.r.t. prison population: Property crime: -0.25 Violent crime: -0.40 Effects on crime: deterrence, incapacitation, rehabilitation Deterrence: increase in certainty more effective than increase in severity Prisons and Crime
©2009 The McGraw-Hill Companies, All Rights Reserved12-33 Take criminals out of circulation Mixed results: each prisoner would have committed 0 - 17 crimes Marginal benefits and costs of incarceration Marginal benefit = $15,000 in avoided crime Excludes benefits of reduced fear and protective measures Marginal cost = $36,000 in facility cost and opportunity cost Prisons: Incapacitation
©2009 The McGraw-Hill Companies, All Rights Reserved12-34 Provide criminals with skills required for success in lawful employment Two thirds participate in rehabilitation programs, broadly defined Simple fact are not encouraging Roughly 2/3 of former inmates rearrested within 3 years of release Released inmates account for 10% - 12% of crime Prisons: Rehabilitation
©2009 The McGraw-Hill Companies, All Rights Reserved12-35 Difficult to change anti-social attitudes Entrenchment in criminal world Large increase in skill required to make employment more lucrative than crime Rehab for youths passes benefit-cost test: Modest reduction of costly crime General Ineffectiveness of Rehabilitation Programs
Crime Chapter 13 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Crime Chapter 13. Purpose In this chapter we explore one of the problems associated with urban areas, crime. We introduce three tools that allow us to.
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