Crime, Economics Of

Theory

In Becker's analysis, the equilibrium volume of crime reflects the interaction between offenders and law enforcement authorities, and the focus is on optimal probability, severity, and type of criminal sanction—the implicit “prices” society imposes on criminal behavior to maximize social welfare. Subsequent work aimed toward a more complete formulation of components of the system, especially the supply of offenses, the production of specific law enforcement activities, and alternative criteria for optimal law enforcement. Later theory expanded the analytical setting to address the interaction between potential offenders (supply), consumers and potential victims (private “demand”), and deterrence and prevention (government intervention). This “market model of crime,” as Ehrlich noted, includes interactions with the general economy as well.

Supply

Economists generally model the extent of participation in crime as an outcome of the allocation of time among competing legitimate and illegitimate activities by potential offenders acting as expected-utility maximizers. While the mix of pecuniary and nonpecuniary benefits varies across different crime categories, which attract offenders of different attitudes toward risk and proclivities (“preferences”) for crime, the basic opportunities affecting choice are the perceived probabilities of apprehension, conviction, and punishment; the marginal penalties imposed; and the differential expected returns on competing legal and illegal activities. Entry into criminal activity, and the extent of involvement in crime, relate inversely to deterrence variables and other opportunity costs associated with crime and directly to the differential return it can provide over legitimate activity. Moreover, a 1 percent increase in the probability of apprehension exerts a larger deterrent effect than corresponding increases in the conditional probabilities of conviction and punishment.

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