1. Economics of Crime and Punishment

2. Criminal Law  Criminal intent  Public harm Fear? Victimless crimes?  Public prosecution

3. Which is more costly to society? I.Convicting an innocent person II.Failing to convict a guilty person

4. Criminal Law  Criminal intent  Public harm Fear? Victimless crimes?  Public prosecution  Standard of proof  Punishment Civil penalties (damages) are designed to get injurers to internalize the costs so that only efficient harms take place Criminal punishment is designed to deter

5. Can Crime Be Efficient?  You steal my car?  Lost hiker breaks into cabin?  Efficient murder? A very rich man decides he would derive a huge amount of pleasure from hunting and killing a human being. He finds ten people who all agree that he can pay them each $1,000,000, they’ll draw straws, and he can hunt and kill whoever draws the shortest straw. Armin Meiwes Posted an ad online “looking for a well-built 18-to-30-year-old to be slaughtered and consumed”

6. Rational Criminal Model  Max y(x) – p(x)*f(x) Commit crime if MB > MC  Example: Grand Theft Auto Car = $40,000 Income = $60,000 p(arrest) =.20 p(conviction) =.50 Jail = 5 years Where: x = amount of crime y(x) = criminal payoff p(x) = probability of punishment f(x) = punishment MB = $40,000 MC = (5)($60,000)(.20)(.50)= $30,000 Steal the car!

7. Rational Criminal Model  Policy Implications Increase jail sentence Increase probability of arrest Increase probability of conviction Increase income  Tradeoff between severity and certainty of punishment? High punishment + low certainty Low punishment + high certainty Fines or Jail?

8.  Momentary lapse (regret) model Benefit from crime is immediate Punishment, if it occurs, comes in the future  Commit crime if: PV(Benefit) > PV(Expected Future Punishment) Do criminals have high discount rates? Slightly Irrational Criminal Model

9. Optimal Crime  Objective: min SC = Harm + Prevention Costs  What happens to optimal crime if: Population increases? Less expensive surveillance technology is developed? Crime $ Marginal Harm Marginal Prevention Cost C* C0C0 TH 1 TPC 1 Public deterrence vs Private deterrence

10. Crime Stats  Prisoners: 2,000,000  Probation + Parole: 5,000,000  Violent crime rates have been falling since the 1980s  Criminals are disproportionally young males  Violent criminals and their victims are disproportionally black  Small number of people commit large proportion of violent crimes  Social cost? Criminal justice = $100 billion Private spending = $100 billion Harm to victims = $300 billion 700 per 100,000 $500 billion or 4% GDP

11. Does Punishment Deter Crime?  Crime = f(EP, Labor Market, Socioeconomic) Aggregate data (“crime rate” studies) Small population studies

12. Does Crime Pay? Criminal and Legitimate Earnings per Year (1988 $) High-RateLow-Rate Crime TypeCrimeWorkCrimeWork Burglary$5,711$5,540$2,368$7,931 Robbery6,5413,7662,8145,816 Swindling14,8016,2456,8168,113 Auto theft26,0432,30815,0085,457 Mixed6,9155,0865,6266,956 Source: Wilson and Abrahamse (1992)

13. What caused the drop in crime rates during the 1990s?  Economic boom of the 1990s?  More victim precaution?  Gun Control laws?  Change in policing strategies?  Increased capital punishment?  Increased number of police?  Increased incapacitation?  Decline of crack cocaine?  Legalized abortion?

14. Death Penalty 4958 executions

15. Death Penalty 77,522 on death row 304 found to be innocent

16. Death Penalty

17. What caused the drop in crime rates during the 1990s?  Economic boom of the 1990s?  More victim precaution?  Gun Control laws?  Change in policing strategies?  Increased capital punishment?  Increased number of police?  Increased incapacitation?  Decline of crack cocaine?  Legalized abortion?

18. Drugs  Prohibition aims to raise expected punishment for buyers/sellers Impact is to raise price of drugs  Two types of users: Casual: more elastic demand (D 1 ) Addicts: more inelastic demand (D 2 ) Cocaine $ S1S1 $ S1S1 D1D1 D2D2 P0P0 S2S2 S2S2 P1P1 P2P2 Q0Q0 Q1Q1 Q0Q0 Q2Q2