1. Chapter 5 Economics of Crime and Its Prevention: How Much Is Too Much? Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. 5-2 What Is Crime? Immorality? Illegality?

3. 5-3 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

4. 5-4 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

5. 5-5 Different Types of Goods and Services Characteristics of Goods and Services  Exclusivity  Rivalry Private Goods and Services Semi-private Goods and Services  Externalities  Government intervention in the case of externalities Public Goods and Services  Free-rider problem  Government production of public goods

6. 5-6 The Optimal Level of Crime Prevention Cost-Benefit Analysis of Crime Prevention 123456 Units of Crime Prevention per Year Total Benefit to Society Marginal Social Benefit Total Cost of Society Marginal Social Cost Net Benefit to Society 00--0 0 1200 60 140 238018012060260 354016018060360 468014024060440 580012030060500 690010036060540 79808042060560 810406048060560 910804054060540 1011102060060500

7. 5-7 Allocation of the Crime Prevention Budget Equimarginal Principle

8. 5-8 Changing the Legal Status of Goods and Services Marijuana (millions of ounces per year) Price per ounce D1D1 D1D1 S1S1 S1S1 P1P1 M1M1 D2D2 D2D2 S2S2 S2S2 M2M2 P2P2

9. 5-9 Causes of Criminal Activity Economic benefits of crime Psychic income Economic costs of crime Psychic costs