1 Economic Concepts Controlling a bad

2 Outline The Economic Paradigm The Economic Paradigm The Data: Expenditures on the Criminal Justice System The Data: Expenditures on the Criminal Justice System The Schematic Model: Crime Generation and Control The Schematic Model: Crime Generation and Control The Crime Control Technology The Crime Control Technology

3 Part One:The Economic Paradigm Step One: Spell out the options for choice Step One: Spell out the options for choice Step Two: Value the options for choice Step Two: Value the options for choice Step Three: Choose the best option Step Three: Choose the best option

4 The Economic Paradigm & The Criminal Justice System Step Three: The Objective- Minimize the total cost, i.e. the damages to victims plus expenditures on the criminal justice system Step Three: The Objective- Minimize the total cost, i.e. the damages to victims plus expenditures on the criminal justice system We want to find the best level of expenditures on the criminal justice system, i.e. the level that will minimize the total cost We want to find the best level of expenditures on the criminal justice system, i.e. the level that will minimize the total cost Min. TC($) = r*OF + E, Min. TC($) = r*OF + E, Where TC is total cost in dollars, r is the loss rate per offense, OF is the number of offenses, and E is expenditure on the criminal justice system in dollars Where TC is total cost in dollars, r is the loss rate per offense, OF is the number of offenses, and E is expenditure on the criminal justice system in dollars

5 Example of Optimization from Lecture One ( Introduction) Step One: Total Cost Versus Expenditure on the Criminal Justice System (CJS), the yellow line in the next graph Step One: Total Cost Versus Expenditure on the Criminal Justice System (CJS), the yellow line in the next graph Step Three: Choosing the lowest total cost expenditure level, indicated by the red line in the next graph Step Three: Choosing the lowest total cost expenditure level, indicated by the red line in the next graph

6 The Graphics of Total Cost, TC TC = r*OF + E 6 $ E on CJS Total Cost (E) Minimum Cost Optimal Expenditure Economic Paradigm 1.Choose objective e. g. minimize sum of damages to victims plus expenditures, E, on CJS 2. Describe states of the world (options for choice) Total cost curve (E) 3. Choose the best option

7 Step One: Listing the options for choice Show how expenditures on the criminal justice system varies with expenditures on the criminal justice system Show how expenditures on the criminal justice system varies with expenditures on the criminal justice system

8 Graphics: expenditure on CJS is easy 8 $ Expenditure on criminal justice system, E on CJS, $ 45 degrees Square: all four sides Are equal in length

9 Step One Continued: Listing the options for choice Show how offenses decreases with expenditures on the criminal justice system Show how offenses decreases with expenditures on the criminal justice system

10 The Graphics of Crime Control, if Crime Is Controllable 10 Offenses, OF E on CJS OF(E)

11 Step Two: Valuing the options for choice The loss rate, r, is the dollar cost per offense to victims, so r*OF, the losss rate times the number of offenses is the total damages to victims in dollars The loss rate, r, is the dollar cost per offense to victims, so r*OF, the losss rate times the number of offenses is the total damages to victims in dollars

12 The Graphics of Damages to Victims, if Crime Is Controllable 12 $ E on CJS r*OF(E)

13 Step Two: Finishing the options for choice Add expenditure on the criminal justice system plus damages to victims as they vary with expenditures on the criminal justice system Add expenditure on the criminal justice system plus damages to victims as they vary with expenditures on the criminal justice system

14 The Graphics of Damages to Victims Plus Expenditures on CJS 14 $ E on CJS r*OF(E) 45 degrees

15 Part Two: Expenditures on the Criminal Justice System

16 Federal State and Local Expenditures

17 Exponential Growth?

18 Exponential Growth of Expenditures E(t) = E(0)*e g*t E(t) = E(0)*e g*t where E is expenditures in year t, E(0) is expenditures in year 0, e is the exponential function, g is the exponential rate of growth per year, and t is year t where E is expenditures in year t, E(0) is expenditures in year 0, e is the exponential function, g is the exponential rate of growth per year, and t is year t The natural logarithm, ln, linearizes this relationship The natural logarithm, ln, linearizes this relationship Ln[E(t)] = ln[E(0)*e g*t ] = ln[E(0)] + g*t Ln[E(t)] = ln[E(0)*e g*t ] = ln[E(0)] + g*t If you plot expenditures on a logarithmic scale against t (year), then g is the slope If you plot expenditures on a logarithmic scale against t (year), then g is the slope See graph on the next slide See graph on the next slide

19 Three Eras of Growth in CJS Expenditures

20 Correcting for inflation, Using CPI

21 Real Total Direct CJS Expenditures On a Logarithmic Scale

22 Part Three: Schematic of the Criminal Justice System Crime Generation (supply of offenses) Crime Generation (supply of offenses) Crime Control, the production of the certainty and severity of punishment (deterrence and detention) Crime Control, the production of the certainty and severity of punishment (deterrence and detention)

23 Crime Generation Crime Control Offense Rate Per Capita Expected Cost of Punishment Schematic of the Criminal Justice System Causes ? (detention, deterrence) Expenditures Weak Link

24 Schematic of the Criminal Justice System Crime Generation (supply of offenses) Crime Generation (supply of offenses) Offenses varies with the certainty of punishment, CR, the severity of punishment, SV, the celerity of punishment, CY,socio- economic causal factors, SE, and moral compliance, MC Offenses varies with the certainty of punishment, CR, the severity of punishment, SV, the celerity of punishment, CY,socio- economic causal factors, SE, and moral compliance, MC OF = f(CR, SV, CY, SE, MC) OF = f(CR, SV, CY, SE, MC) Crime Control Crime Control

25 Crime Generation Crime Control Offense Rate Per Capita Expected Cost of Punishment Schematic of the Criminal Justice System Causes ? (detention, Deterrence, Rehabilitation, And revenge) Expenditures Weak Link

26 Schematic of the Criminal Justice System Crime Generation (supply of offenses) Crime Generation (supply of offenses) OF = f(CR, SV, CY, SE, MC) OF = f(CR, SV, CY, SE, MC) Crime Control, the production of the certainty and severity of punishment (deterrence and detention) Crime Control, the production of the certainty and severity of punishment (deterrence and detention) Clearance ratio, CR, varies with the level of offenses, OF, and labor resources, L Clearance ratio, CR, varies with the level of offenses, OF, and labor resources, L CR = g(OF, L) CR = g(OF, L)

27 Crime Generation Crime Control Offense Rate Per Capita Expected Cost of Punishment Schematic of the Criminal Justice System: Simultaneity Causes ? (detention, Deterrence, Rehabilitation, And revenge) Expenditures Weak Link OF = f(CR, SV, CY, SE, MC) CR = g(OF, L)

Part Four: Crime Control Technology Combine crime generation with the production function using a 4-way diagram Combine crime generation with the production function using a 4-way diagram OF = f( CR, SV, CY, SE, MC) OF = f( CR, SV, CY, SE, MC) CR = h(E) CR = h(E) 28

Production Function for the Criminal Justice System (CJS) 1. Variation in clearance ratio with criminal justice system expenditure per capita Clearance Ratio Criminal Justice System expenditures per capita production function CR = h($E) 29

per capita expenditures on CJS offense rate per capita Clearance ratio Crime Generation Four-Way Diagram: Crime Generation & Crime Control 30

per capita expenditures on CJS offense rate per capita expected cost of punishment Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function 31

per capita expenditures on CJS offense rate per capita Clearance ratio Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

per capita expenditures on CJS offense rate per capita Clearance ratio Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

per capita expenditures on CJS offense rate per capita Clearance ratio Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

per capita expenditures on CJS offense rate per capita Clearance ratio Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

per capita expenditures on CJS offense rate per capita Clearance ratio Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

per capita expenditures on CJS offense rate per capita expected cost of punishment Crime Generation Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

per capita expenditures on CJS offense rate per capita Four-Way Diagram: Crime Generation & Crime Control

Test the Theory with the Data Report to the Nation On Crime and Justice, Second edition Report to the Nation On Crime and Justice, Second edition P. 122 P

Source: Report to the Nation on Crime and Justice 40

Source: Report to the Nation on Crime and Justice Expect Get 41

per capita expenditures on CJS offense rate per capita Clearance ratiot Crime Generation OF=f( CR, SV, CY, SE, MC) Four-Way Diagram: Crime Generation & Crime Control per capita expenditures on CJS Production Function square

Source: Report to the Nation on Crime and Justice Causal conditions account for more variation than control 43

Crime Generation Crime Control Offense Rate Per Capita Expected Cost of Punishment Schematic of the Criminal Justice System Causes ? (detention, deterrence) Expenditures Weak Link 44

Part Five; Class Survey Fall 2011 Vs. Winter 2011 Scoring Ten Behaviors Scoring Ten Behaviors 48 responses Fall responses Fall responses in Winter responses in Winter 2011

SERIOUSNESS SURVEY RATE THE SERIOUSNESS OF EACH OF THE FOLLOWING BEHAVIORS ON A SCALE FROM ZERO( LEAST SERIOUS) TO TEN( MOST SERIOUS): MEDIAN W11 F11 1. HOMICIDE _10 10__ 2. MASS POISONING ( e.g. TYLENOL)_ 9 9__ 3. FORCIBLE RAPE _ 9 _10_ 4. ARSON: SET FIRE TO A GARAGE_ 7 __7 5. SELLING HEROIN _ 7 _7_ 6. AUTO THEFT _ 6 _6_ 7. EMBEZZLEMENT OF $1,000_ 5 __5 8. PROSTITUTE IN A HOUSE OF PROSTITUTION _ 4 __3 9. POSSESSION OF MARIJUANA _ 2 __1 10. SNIFFING GLUE _ 2 __1

Center of the Scores Distribution Mode: most likely Mode: most likely Median: middle person Median: middle person Average: sum of scores divided by total number of people Average: sum of scores divided by total number of people

2.5% mean

Consistency from year to year

Conclusions Consistency from year to year Triage is possible: we can separate the more serious behaviors from the less serious behaviors

Distribution of Homicide Scores in F 2011

Conclusions Consistency from year to year Triage is possible: we can separate the more serious behaviors from the less serious behaviors For serious behaviors, a clear majority view For example, for homicide 43 out of 48 score it a 10, while 3 out of 43 score it a 9 and 2 out of 48 score it a 7.

Distribution of Forcible Rape Scores F 2011 Over half the class score forcible rape a 10, 44 out of 48 score it 8 or above.

Three ? Views on Pot, Fall 2011 Score: 0-2, 35 Score: 3-5, 11 Score: 6&7, 2 24, a score of 1, would carry a majority vote, 32, a score of 2, would carry a 2/3 vote

Conclusions Consistency from year to year Triage is possible: we can separate the more serious behaviors from the less serious behaviors For serious behaviors, a clear majority view For example, for homicide 43 out of 48 score it a 10, while 3 out of 43 score it a 9 and 2 out of 48 score it a 7. The less serious behaviors are more controversial!

Question Since a 2/3 majority view pot possession as not very serious, a score of 2, why doesn’t pot get decriminalized?

Dispersion of Scores Distribution Measures of dispersion Measures of dispersion Standard deviation Standard deviation Inter-quartile range Inter-quartile range Range: Maximum - Minimum Range: Maximum - Minimum

2.5% mean

The more serious the behavior, the less disagreement about policy. Fall 2011

Bureau of Justice Statistics, Report to the Nation The Alternative p.170 One more step: converting seriousness scores to a metric (years of sentence or Loss rate of $) The Economics of Crime Control, Ch. 4

Source: $ 1.54 Million (1990), Orley Ashenfelter, Princeton, Based on highway safety Calibrating $ values for Seriousness

BehaviorSeriousnes s Loss Rate, $NIJ Cohen Homicide10$1,540,001$1,191,00 0 Poisoning9$354,830 Rape10$1,540,001$87,000 arson7$18,837$38,000 Selling heroin7$18,837 Auto theft6$4,340$4,000 embezzlement5$1, prostitute3$53 Pot possession 1$2.82 Miller, Cohen, Wiersema: Victim Costs & Consequences (NIJ)

Months Served in CA Prison Vs. F ’11 Seriousness Scores

Summary