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Economics of Crime and Punishment

Economics of Crime and Punishment. Criminal Law. Criminal intent Public harm Fear? Victimless crimes? Public prosecution. Which is more costly to society?. Convicting an innocent person Failing to convict a guilty person. Criminal Law. Criminal intent Public harm Fear?

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Economics of Crime and Punishment

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  1. Economics of Crime and Punishment

  2. Criminal Law • Criminal intent • Public harm • Fear? • Victimless crimes? • Public prosecution

  3. Which is more costly to society? • Convicting an innocent person • Failing to convict a guilty person

  4. Criminal Law • Criminal intent • Public harm • Fear? • Victimless crimes? • Public prosecution • Standard of proof • Punishment • Civil penalties (damages) are designed to get injurers to internalize the costs so that only efficient harms take place • Criminal punishment is designed to deter

  5. Can Crime Be Efficient? • You steal my car? • Lost hiker breaks into cabin? • Efficient murder? A very rich man decides he would derive a huge amount of pleasure from hunting and killing a human being. He finds ten people who all agree that he can pay them each $1,000,000, they’ll draw straws, and he can hunt and kill whoever draws the shortest straw. Posted an ad online “looking for a well-built 18-to-30-year-old to be slaughtered and consumed” Armin Meiwes

  6. Rational Criminal Model • Max y(x) – p(x)*f(x) • Commit crime if MB > MC • Example: Grand Theft Auto • Car = $40,000 • Income = $60,000 • p(arrest) = .20 • p(conviction) = .50 • Jail = 5 years • Where: • x = amount of crime • y(x) = criminal payoff • p(x) = probability of punishment • f(x) = punishment MB = $40,000 MC = (5)($60,000)(.20)(.50) = $30,000 Steal the car!

  7. Rational Criminal Model • Policy Implications • Increase jail sentence • Increase probability of arrest • Increase probability of conviction • Increase income • Tradeoff between severity and certainty of punishment? • High punishment + low certainty • Low punishment + high certainty Fines or Jail?

  8. Slightly Irrational Criminal Model • Momentary lapse (regret) model • Benefit from crime is immediate • Punishment, if it occurs, comes in the future • Commit crime if: • PV(Benefit) > PV(Expected Future Punishment) • Do criminals have high discount rates?

  9. Optimal Crime • Objective: min SC =Harm + Prevention Costs • What happens to optimal crime if: • Population increases? • Less expensive surveillance technology is developed? $ Marginal Harm Marginal Prevention Cost Public deterrence vs Private deterrence TH1 TPC1 Crime C* C0

  10. Crime Stats • Prisoners: 2,000,000 • Probation + Parole: 5,000,000 • Violent crime rates have been falling since the 1980s • Criminals are disproportionally young males • Violent criminals and their victims are disproportionally black • Small number of people commit large proportion of violent crimes • Social cost? • Criminal justice = $100 billion • Private spending = $100 billion • Harm to victims = $300 billion 700 per 100,000 $500 billion or 4% GDP

  11. Does Punishment Deter Crime? • Crime = f(EP, Labor Market, Socioeconomic) • Aggregate data (“crime rate” studies) • Small population studies

  12. Does Crime Pay? Source: Wilson and Abrahamse (1992)

  13. What caused the drop in crime rates during the 1990s? • Economic boom of the 1990s? • More victim precaution? • Gun Control laws? • Change in policing strategies? • Increased capital punishment? • Increased number of police? • Increased incapacitation? • Decline of crack cocaine? • Legalized abortion?

  14. Death Penalty 4958 executions

  15. Death Penalty 77,522 on death row 304 found to be innocent

  16. Death Penalty

  17. What caused the drop in crime rates during the 1990s? • Economic boom of the 1990s? • More victim precaution? • Gun Control laws? • Change in policing strategies? • Increased capital punishment? • Increased number of police? • Increased incapacitation? • Decline of crack cocaine? • Legalized abortion?

  18. Drugs • Prohibition aims to raise expected punishment for buyers/sellers • Impact is to raise price of drugs • Two types of users: • Casual: more elastic demand (D1) • Addicts: more inelastic demand (D2) S2 S2 $ $ S1 S1 P2 P1 P0 D1 D2 Cocaine Q2 Q0 Cocaine Q1 Q0

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