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Crime1

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  • 1. Economics of Crime Victoria Vernon, Ph.D. Empire State College
  • 2. Examples of economic questions in this course:
    • Are we getting our money’s worth for the dollars we spend on police, jails, and prisons?
    • If crime is going down, why are we devoting more resources to its control?
    • If drug offenders are mostly non-violent, why do we send them to state prison?
    • Legalize drugs?
    • Death penalty?
  • 3. Outline for Today
    • What is Economics?
    • What is crime?
    • Rational criminals
    • How much crime is there?
    • What is the economic impact of crime?
    • Graphs
    • Correlation vs causal link
  • 4. What is Economics?
    • Economics studies
    • how people make CHOICES
    • allocation of scarce resources among alternative uses
    • how do we allocate SCARCE RESOURCES to satisfy the most pressing of our UNLIMITED WANTS?
    • The science of decision-making
    • INDIVIDUAL’S RESOURCES
      • Money
      • Time
      • Effort
    • SOCIETY’S RESOURCES
      • Land
      • Labor
      • Capital
      • Entrepreneurial abilities
  • 5. How do we make choices? (Economics Philosophy)
    • People are SELFISH
      • Maximize our own joy, happiness
      • UTILITY=
    • subjective measure of joy, pleasure, happiness, satisfaction from consuming goods/services
    • People are RATIONAL
      • compare COSTS and BENEFITS of alternatives,
      • Examples of decisions:
      • Buying a cup of coffee
      • Going to college
      • Committing a crime
    • People respond to incentives
    • All choices involve OPPORTUNITY COSTS
      • the next best alternative foregone
  • 6. Rational decision example: Go to college?
    • Benefits:
      • higher future income: $100,000
      • lower insurance rates: $5,000
      • better health: $15,000
      • other ?
      • Total benefits : $120,000
      • Benefits> Costs
    • Costs:
      • tuition, books: $40,000
      • lost income: $60,000
      • Total cost: $100,000
  • 7. Rational decision example: Steel a car?
    • Benefits (expected):
      • Benefits > Costs ?
    • Costs (expected):
  • 8. choice Work and no violence Work and brawl in bars expect $ 24,000 /yr Apprehended: $ 22,000 lose 1 month in court and jail 0.1 0.9 Not apprehended $ 24,000 Expected income: 0.1*$22,000 + 0.9*$24,000 = $23,800 Expected cost: $200 Compare benefit and cost. Rational choice: brawl in bars?
  • 9. What is Crime? Illegal activity.
    • Motivation: self-interest, greed
      • Street Crimes: robbery, burglary, auto theft, larceny
      • White Collar: embezzlement, tax evasion, investment fraud, check fraud, telephone fraud, insider trading
      • Status Offenses : runaway, truant, vagrant, beyond control of parents
      • Black Market: gambling, prostitution, drugs
    • Motivation: hate, rage
      • Street Crimes: homicide, aggravated assault, rape
      • Crimes Against Public Order : vandalism, terrorism
      • Hate Crimes: Columbine High, dragging death
  • 10. Crime?
    • Selling/buying human organs
    • Discrimination of minorities
    • Collusive business agreements, monopolies
    • Breach of contract
    • Breaking Food and Drug Admin regulations
    • Spam emails, hackers attacks
    • File sharing
    • Jaywalking
    • Illegal parking
    • Racial profiling
  • 11.                                                          [ Serious violent crimes : rape, robbery, aggravated assault, and homicide Bureau of Justice Statistics, http://ojp.usdoj.gov/bjs/glance/cv2.htm
  • 12.
    • Property crimes:
    • burglary, theft, motor vehicle theft.
  • 13.
    • Violent crimes : rape/sexual assault, robbery, aggravated and simple assault.
    • Property crimes : household burglary, theft, and motor vehicle theft.
    • Bureau of Justice Statistics, http://ojp.usdoj.gov/bjs/glance/reportingtype.htm
  • 14. How is Crime Measured
    • Victimization Surveys of Households
      • U S Dept of Justice, Bureau of Justice Statistics, Criminal Victimization
    • Citizen (Victim) Reports to Police
      • U S Dept of Justice, FBI, Uniform Crime Reports
  • 15.  
  • 16.
    • 2007: 7.3 million people were under correctional supervision including:
    • Probation - court ordered community supervision of offenders by probation agency.
    • Prison - confinement in a State or Federal facility to serve a sentence of >1 year.
    • Jail - confinement in a local jail while pending trial, serving a sentence <1 year.
    • Parole - community supervision after a period of incarceration.
  • 17.  
  • 18.  
  • 19. February 28, 2008     
  • 20.  
  • 21.  
  • 22.  
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  • 24.  
  • 25.  
  • 26. Public Sector Health Safety Civics Education
  • 27. Victim’s Income Thief’s Income
    • Economic analysis of crime
    • Crime as income redistribution
      • Involuntary transfer from victim to thief
  • 28. Victim’s Income Thief’s Income $6,000 $6,000 Income Distribution $12,000 Total or Social Income Line: Thief’s + Victim’s Income $12,000 Income Redistribution $9,000 $3,000
    • Crime is income redistribution
      • Robin Hood: Take from the rich and give to the poor
      • impact on social welfare: good or bad?
  • 29. Victim’s Income Thief’s Income $6,000 $6,000 Income Distribution $12,000 Total or Social Income Line: Thief’s + Victim’s Income $12,000 Income Redistribution $9,000 $3,000 $11,000 $1,000 social cost of defense $11,000
      • Loss of resources spent on defense
  • 30. What is the nature of crime?
    • Crime is income redistribution
    • Crime is a dead-weight loss for society
      • Loss of resources spent on defense
        • protection of homes, cars, bicycles
      • These resources could be spent on goods and services
      • Victim has less incentive to be productive
      • The impact on social welfare
        • Unambiguously bad
    • Criminal does not take into account impact on society
  • 31. Total Costs of Crime for Society
    • Goods and services ( tangible )
      • Value of property destroyed
      • Time and resources spent by criminal
      • Medical /health services for victims
      • Police and fire services
      • Cost of jail time for taxpayers
      • Loss of productivity and wages by victim
      • Quality of life ( psychic ) by victim, family, friends
      • Loss to bystanders, third parties and society ( negative externalities )
      • Cost of crime prevention activities: locks, guards, alarms, insurance, etc
      • Spending on criminal justice system
      • Taxes, property values, migration from neighborhoods
      • Moral climate of society
  • 32. Choice Legal work Illegal work Unemployed (fail) Employed (succeed) Apprehended (fail) Not Apprehended (succeed) Example of rational choice: Legal Work or Illegal Work?
  • 33. Expected legal Income = 0.9*$12,000 = $10,800 Legal Work or Illegal Work? Choice with Uncertain Outcomes Choice Legal work Illegal work Unemployed (fail) Employed (succeed) Apprehended (fail) Not Apprehended (succeed) 0.1 0.9 $0 $12,000/yr 0.2 0.8 $0 $14,000/yr Expected illegal income = 0.8*$14,000 = $11,200
  • 34. Expected legal Income = 0.95*$12,000 = $11,400 Choice Legal work Illegal work Unemployed (fail) Employed (succeed) Apprehended (fail) Not Apprehended (succeed) 0.1 0.9 $0 $12,000/yr 0.2 0.8 $0 $14,000/yr Expected illegal income = 0.8*$14,000 = $11,200 0.05 0.95 Reduce crime: Maintain a full-employment economy
  • 35. Expected legal Income = 0.9*$12,000 = $10,800 Choice Legal work Illegal work Unemployed (fail) Employed (succeed) Apprehended (fail) Not Apprehended (succeed) 0.1 0.9 $0 $12,000/yr 0.2 0.8 $0 $14,000/yr Expected illegal income = 0.7*$14,000 = $9,800 0.3 0.7
    • Reduce crime: Maintain Effective Criminal Justice System
      • keep the probability of apprehension high
  • 36. Expected legal Income = 0.9*$12,000 = $10,800 Choice Legal work Illegal work Unemployed (fail) Employed (succeed) Apprehended (fail) Not Apprehended (succeed) 0.1 0.9 $0 $12,000/yr 0.2 0.8 -$3,000 (fine) $14,000/yr Expected illegal income = 0.8*$14,000 - 0.2*$3,000 = $10,600 $0
    • Reduce crime: Punish the criminal
      • make crime less attractive
  • 37. Summary
    • Crime is an economic problem
      • loss of resources(dead weight loss) from private and public defense
    • Your economic status affects your probable behavior: work or crime
    • Earning power affects your probable behavior
    • Social Measures to Reduce Crime
      • Maintain a full-employment economy
      • Maintain an Effective Criminal Justice System
        • keep the probability of apprehension high
      • Punish the criminal
        • make crime less attractive

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