McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 28 The Economics of Crime

1- 2 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-2 Chapter Outline Who Commits Crime And Why The Rational Criminal Model The Costs Of Crime Optimal Spending On Crime Control

1- 3 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-3 Who Commits Crime and Why Disproportionately to their percentage in the population crime is committed by Men The young The poor The socially disadvantaged

1- 4 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-4 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.

1- 5 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-5 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 28% of the population.

1- 6 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-6 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.

1- 7 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-7 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.

1- 8 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-8 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.

1- 9 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 28-9 Evidence against the RCM 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.

1- 10 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 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.

1- 11 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Costs of Crime $214 billion is currently spent on the criminal justice system (police, courts and prisons) There are 20 million crimes 4.3 million violent 15.7 million non-violent Approximately 10 million more are unreported

1- 12 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 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..$10,000

1- 13 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 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 a rape victim. Some economists measure the cost of crime avoidance and use the reciprocal of the crime reduction fraction to estimate “what you are willing to pay” to avoid being a crime victim.

1- 14 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin How Much Crime Does an Average Criminal Commit Estimates from criminologists vary from a 10 to 180. Economists use a conservative 10 to 20 to estimate the usefulness of crime control.

1- 15 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin The Net Result on the Question of How Much Crime Costs At 10 crimes per year and $500 per crime each criminal commits $5,000 worth of crime each year he is not in jail. At 20 crimes per year and $10,000 per crime each criminal commits $200,000 worth of crime each year he is not in jail.

1- 16 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Optimal Spending on Crime Control While the “average” criminal may commit $200,000 worth of crime and it costs only $28,750 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. This is called Marginal Analysis.

1- 17 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 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?

1- 18 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin What Matters in Crime Control What is thought to Matter and Doesn’t Community Policing Gun Buybacks Death Penalty What is Thought to Matter and Does Number of Police Number in Jail Abortion or Lead? Economist Steven Levitt argues that legalization of abortion decreased unwantedness in the 1970s which led to a decrease in crime in the 1990s. He argues that these not-born children did not grow up to be mischievous and criminal adults. Economists Jessica Reyes argues that eliminating lead in paint and gasoline reduced atmospheric lead. When ingested by children, lead decreases their ability as young adults to avoid impetuous behavior.

1- 19 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 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 crimes.

1- 20 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Marginal Cost and Marginal Benefit Marginal Costs Marginal Benefits MC MB Murders, Rapists, Drug Dealers, Drug Users, Jaywalkers

1- 21 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 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 the marginal costs of adding another year to a sentence grow (because of medical costs), the benefits decrease (because the older you are the less likely you are to commit crime.