Economics of Crime and Its Prevention Chapter 5 Economics of Crime and Its Prevention

What Is Crime? Immorality Illegality

Classification of Criminal Acts Department of Justice classification scheme Violent crimes Crimes against property Traffic in illegal goods and services Other crimes Recent trends in crime

The Costs of Crime Opportunity Cost Principle Direct costs + Negative Externalities + Cost of Prevention, Apprehension and Correction Total Cost of Crime Transfers of Purchasing Power Criminal activities versus Crime Prevention Activities

Classification of Goods Individually Consumed Goods Semi-collectively Consumed Goods Externalities Internalizing externalities Collectively Consumed Goods Free-rider problem Government production of public goods

The Optimal Level of Crime Prevention Cost-Benefit Analysis of Crime Prevention 1 2 3 4 5 6 Units of Crime Prevention per Year Total Benefit to Society Marginal Social Benefit Total Cost of Society Marginal Social Cost Net Benefit to Society -- 200 60 140 380 180 120 260 540 160 360 680 240 440 800 300 500 900 100 7 980 80 420 560 8 1040 480 9 1080 40 10 1110 20 600

Allocation of the Crime Prevention Budget Equimarginal Principle

Changing the Legal Status of Goods and Services Price per ounce D1 S2 P1 P2 D2 S1 D1 S2 M1 M2 Marijuana (millions of ounces per year)

Causes of Criminal Activity Economic benefits of crime Psychic income Economic costs of crime Psychic costs