Overview and analysis on the economics model of crime by Becker (1968). Including a case study on the Three Strikes Law in California, USA, using differences in differences methodology

1. Crime and punishment
_Group members:
Khanh Ha Bui
Tarun Patel
Aru Muortat
Giorgos Koursaros

2.  Trends in the crime rates in the USA for the past 60 years
 Economic model of crime
 Difference-in-differences method
 Case study: Three strikes law in California - 2011
 Limitations of the case study and economic model

4. • Crime in the USA today about half of what it was at its peak in 1991
• This has coincided with a sharp increase in incarceration rates as illustrated below
• Since 1990, incarceration nearly doubled, adding 1.1 million people behind bars

6.  Earliest form of the model published by Becker in 1968
 Argues that the rational offender faces a gamble: Individuals make
a rational choice between legitimate work or committing crime
 This choice is formulated by the expected utility of each. The model
is made up of the following variables:
W – wages from legitimate activity
Wc – earning from criminal activity
p – the probability of getting caught
s – the cost to the individual in punishment

7. Expected utility of crime:
U= (1-p) U(Wc)- pU(S)
U= the utility associated with the choice to abstain from
crime i.e. legal earnings
(1-p)U(Wc) is the utility associated with choosing to
commit a crime that does not result in an apprehension
pU(S) is the disutility associated with choosing to
commit a crime that results in apprehension and
punishment

8.  U(W) is the expected utility from legitimate work
An individual will choose to commit a crime if the following
holds true:
(1-p)U(Wc)- pU(S) > U(W)
i.e. if the expected utility of crime is greater than the
expected utility of work. Crime is:
 Positively related to criminal earnings, U(Wc)
 Negatively related to legitimate earnings, U(W)
 Negatively related to probability of getting caught, p
 Negatively related to punishment, S

9.  Laboratory experiments:
• These enforce scientific control by testing a hypothesis in the artificial and
highly controlled setting of a laboratory
• Random assignment of participants into control and treatment groups is
organised by the researchers
 Natural experiments (Field Experiments):
• Natural experiments, examine a naturally occurring intervention in the real
world by making use of available real world data.
• Random assignment of units into treatment and control is done naturally by
some real world event, policy or regulation.

10.  2 groups and 2 time periods
 Treatment group is exposed to the treatment in period
2 but not period 1
 Control group isn’t exposed to the treatment at any
period
 We measure the difference in the differences from time
period 1 to 2 across the two groups to account for
extraneous variables.

11. Source: http://en.wikipedia.org/wiki/Difference_in_differences

12. Three Strikes and You’re Out: A Triple Differences
Approach to Estimating the Deterrent Effect of
California’s Three Strikes Law. (Marcet,Daniel 2011)
This case study looks at how criminals in California were
affected by the three strike law, it uses a natural setting
and also uses a difference in difference analysis technique

13. The model states that individuals choose between criminal
activity and standard economic activity we are specifically
looking at how punishment (S) negatively related to crime.

14.  The three strike rule implied that criminals were deterred in criminal activity as
harsher punishments were doled out.
 The reason for these laws was two-fold
To incarcerate habitual criminals
To increase penalties
 In this case study we see a natural experiment which utilises difference in
difference analysis
 The treatment group was California as they implemented the three strike law
first. The control groups were 11 un-named states.
 The case study was testing whether criminals relapse back into crime and also the
effect it has as a deterrent

15.  In order to look for a deterrent effect for harsher criminal sanctions,
it is ideal to have a law that imposes harsh sentences on one group
of criminals while sentencing a group of similar criminals much less
harshly.
 The treatment group
Individuals with two strikes and have been convicted on both
occasions
 The control group
Individuals with two strike-able offense but only one conviction for
the strike-able offense a convicted for a non strike-able offense.

16.  The three strikes law raises the cost of engaging in a life of
crime for all California criminals. Therefore, if criminals are
future oriented, then it is possible that the law would deter
them regardless of the number of strikes that they have.
 There was some evidence that supports the idea that the law
may be acting to deter crime for individuals with no strikes
and at least one prior felony arrest. Relapse back into crime
decreased by 5.4% for these criminals.
 Individuals with 1 strike reduce their likelihood of committing a serious crime by
8.2%
 Little evidence to suggest that the third strike penalty reduced crime through
deterrence. It showed that those with a 25 to life sentence with two strikes were
no more affected than a person with one strike and a double conviction

17.  Treatment group was only limited to California
 Unnamed states – uncertainty regarding factors that affect crime
rates
 Gender bias
 Only examines individuals who have the tendency to commit crime,
not all members of society

18.  Differences in individuals’ risk preferences
 Rationality assumption
 Constructed based on official reported crime statistics <- easily
influenced by victim’s willingness to report crime by police recording
practices and procedures
 Differences in ethical, religious, moral beliefs

19.  Punishment showed statistically to have only a small effect on crime
deterrence and reoffending
 Implies other factors are responsible for fall in crime since 1990’s
 Police enforcement, legalisation of abortion, decline in crack
consumption
 Incarceration argument does not look at the social effect it has on
society such as family breakdown, e.g: I in 9 African American
children has a parent in prison

20.  Table 1.
 List of Triggering Offenses (List of Strike able Offenses)113
 “Strikeable offenses” under the three strikes law are broken down into two categories: Violent felonies and serious
felonies. Whether an individual commits a serious felony or a violent felony does not matter for the purposes of
future sentencing.
 Violent Felonies
 Murder
 -Attempted Murder
 Manslaughter
 Rape by force or violence
 Child molestation
 Any felony resulting in great bodily injury or in which a firearm was used-
 Robbery of an inhabited dwelling in which a deadly or dangerous weapon was used-Out-of-state kidnapping
 Serious Felonies
 Aggravated assault
 Arson
 Exploding a destructive device with intent to do harm
 Burglary of an inhabited dwelling
 Robbery or bank robbery
 Kidnapping-Any felony in which the defendant used a dangerous or deadly weapon selling or distributing
heroin, cocaine.

21. Techniques for empirical analysis of natural
experiments
 Matching
 Instrumental Variables
 Regression Discontinuity
 Fixed Effects
 Difference in Differences

22.  Assumptions of difference-in-differences
• DID requires a parallel trend assumption
• Composition of individuals of the two groups is assumed to remain unchanged
over time.
• ‘Treatment’ and ‘control’ group should be similar in every way except receipt of
treatment
• All the assumptions of the OLS model apply equally to DID

24.  Aaron Chalfin, Justin McCary, May 9, 2014. Criminal Deterrence: A Review of the
Literature.
 Chettiar, I. M., February 11, 2015. The Atlantic. [Online]
Available at: http://www.theatlantic.com/features/archive/2015/02/the-many-
causes-of-americas-decline-in-crime/385364/
 Marcet, D., 2011. Three Strikes and You're Out: A Triple Differences Approach to
Estimating the Deterrent Effect of California's Three Strikes Law.