Criminals and Victims

W. David Allen

• Publisher: Stanford Economics and Finance
• Year: 2011
• Print ISBN: 9780804762526
• eBook ISBN: 9780804777599
• Edition: 1
• Topic: Economics
• Subtopic: Microeconomics
• Index: Economics

Criminals and Victims presents an economic analysis of decisions made by criminals and victims of crime before, during, and after a crime or victimization occurs. Its main purpose is to illustrate how the application of analytical tools from economics can help us to understand the causes and consequences of criminal and victim choices, aiding efforts to deter or reduce the consequences of crime. By examining these decisions along a logical timeline over which crimes take place, we can begin to think more clearly about how policy effects change when it is targeted at specific decisions within the body of a crime.

This book differs from others by recognizing the timeline of a crime, paying particular attention to victim decisions, and examining each step in the crime cycle at the micro-level. It demonstrates that criminals plan their crimes in systematic, economically logical ways; that deterring the destruction of criminal evidence may deter crime in general; and that white-collar criminals exhibit recidivism patterns not unlike those of street criminals. It further shows that the degree of criminality in a society motivates a variety of self-protection behaviors by potential victims; that not all victim resistance makes matters worse (and some may help); and that victims who report their crimes do not receive high returns for going to the police, helping to explain why some crimes ultimately go unreported.

PART ONE

Offender Behavior

CHAPTER 1

Who Are Criminals? A Review

An economic framework becomes applicable to, and helps enrich, the analysis of illegal behavior.

—GARY S. BECKER

I. INTRODUCTION

Within the discipline of economics as a whole, crime economics occupies part of the large subdiscipline of law and economics, the application of economic analysis to matters of law. In law and economics, the formalized origins of which trace back to Coase (1960), researchers study the efficient formation of deterrence mechanisms, efficient bargaining and litigation, cost-benefit analysis of laws and legal rules, and the regulation of firms and industries—among other issues. Because crime constitutes such a pervasive and socially destructive problem, studying it demands critical thinking and careful analysis of the decisions and experiences of the economic agents involved—lawmakers and police, prosecutors and judges, and indeed criminals and victims. Viewed as a collective, crime economic research seeks to understand why crime occurs and, given that it does occur, seeks mechanisms that reduce its incidence or its consequences. By probing the determinants and processes by which criminals and victims make decisions, we can begin to formulate and evaluate specific policies and procedures toward this objective and learn more about human behavior in the process.

Part One of this book examines economic decisions made by potential and actual criminals, in a series of chapters containing original scholarly research on these decisions and their consequences. But before we look ahead to new research, we should take a look back at the research that has come before; this will give us a sharper perspective on the field as a whole even as we move forward within it. This is the objective of this initial chapter, a focused review of economic literature relating to criminal behavior.

As we shall see, crime economic research started with theoretical and empirical analysis conducted by the economists Gary S. Becker (the 1992 Nobel Laureate) and Isaac Ehrlich, usually working independently but occasionally working as collaborators. They and the many economists who followed broke new ground in economics by applying rigorous, objective analytical tools to the study of issues once solely the intellectual domain of sociologists, criminologists, and psychologists. Rather than viewing illegal activity as unpredictable, purely aberrant, or irrational behavior or behavior influenced primarily by external social or environmental factors, economists model offender and victim behavior as individual choices made under time, financial, informational, and even spatial constraints—the same sorts of constraints that regulate decision making in all applied microeconomic analysis. To the extent that these constraints reflect circumstances under the direct or indirect control of policy makers, economic models of crime can reveal concrete connections between policy mechanisms (e.g., policing, sanctioning, and employment availability) and important equilibrium outcomes pertaining to both offenders and victims.

To see how economists have methodically constructed this discipline of crime economics, let us take a brief tour through the major theoretical and empirical advances that have been made over the course of a generation of scholarly research.

II. THEORETICAL ADVANCES

A. The Conceptual Foundation

Most theoretical fundamentals in the economic analysis of illegal activity originate with the economic model of crime advanced by Becker (1968), who modeled crime alternately as an individual choice and as a broader social problem. Both approaches became highly influential to the great amount of crime economic research—theoretical and empirical—that followed.

Modeling crime as an individual choice involves specifying an economic agent’s objective function, typically an expected utility expression that incorporates the probability of unsuccessful criminality (e.g., resulting in detection, apprehension, or sentencing) and an opposing probability of successful criminality. This direct incorporation of factors capturing uncertainty reflects a “state-preference” approach to modeling illegal activity. As discussed in Part Two of this book, such an approach underlies the theoretical analysis of crime victim behavior as well, although in general economists have not studied the economic decisions of victims as extensively as they have the actions of criminals. In the classic approach to modeling criminal behavior, the hypothetical individual faces what amounts to a time-allocation decision; that is, the individual must decide how much scarce time to allocate to legal or illegal activity, given that benefits exist with either choice. At the time Becker’s analysis appeared, this approach followed naturally from his own earlier development of theories of home production (Becker 1965), a new approach to labor economics that emphasized time allocation in general, that is, that economic agents allocate their time to a variety of activities beyond just generic labor and leisure, including marital courtship, child rearing, and meal preparation.

Becker’s (1968) analysis also illustrated how we can use familiar microeconomic tools—constrained optimization, the logic of consumer choice, production theory, and others—to study crime from the perspective of society as a whole. This approach to the phenomenon emphasizes that society, as an aggregate or collective decision maker, has an incentive to allocate some of its scarce resources to minimize the social “harm” created by crime. A society might allocate more resources to police, whose greater presence can enhance the probability of detection or capture, or it might alter the nature of penalties judges and juries can impose on criminals; as a society we might decide that fines suit our retributive objective well enough or that imprisonment does a more efficient job, depending on the perceived severity of the crime, its implied harm. This somewhat more aggregated approach to the economics of crime has inspired major strands of economic research concerned with the design of optimal sanctioning mechanisms, policing, and other policy aimed at improving deterrence. It even underlies the public-choice-oriented approach concerned with individual and especially social costs of law enforcement itself, as exemplified by Benson, Kim, and Rasmussen (1994) and Paul and Wilhite (1994). Although this book will emphasize the individual-based analytical approach rather than this sociocentric approach, we shall on occasion encounter conceptual ideas and empirical results that have relevance to the more aggregated approach.

The extension and refinement of Becker’s individual-based, statepreference approach to crime economics began with Ehrlich (1973). In this seminal article, Ehrlich applied and synthesized microeconomic concepts ranging from elasticity to occupational choice to the dynamics of human capital development, formulating hypotheses about how these factors come together not only to influence the decision to commit crime in the first place but also, very critically, to affect recidivism. Ehrlich’s analysis, then and now, emphasizes the role of opportunities as they shape criminal outcomes—opportunities to engage in legal and illegal (or “illegitimate”) activities, formed in part by a person’s experiences in the legitimate labor market, illegal markets, and even prison itself. Many of Ehrlich’s insights about recidivism become highly relevant in our study of this topic in Chapter 5. Just as important as his theoretical advancements are Ehrlich’s empirical investigations of his hypotheses. Ehrlich became one of the first economists (of now many) to test the direct implications of the Beckerian economic model of crime using real crime data. We consider Ehrlich’s empirical analysis in more detail later in this chapter. After Becker (1968) and Ehrlich (1973), it became clear that we could learn a great deal about crime, punishment, and deterrence by applying economic analytical tools to the study of these phenomena and that we could indeed assume that those who commit crime make decisions rationally, not necessarily because of psychological aberrance.

In the same era in which Becker and Ehrlich were establishing the conceptual foundation of crime economics, Sjoquist (1973) and Block and Heineke (1975) laid additional groundwork in important papers of their own. Sjoquist (1973) confronted head-on the notion that criminals act as economically rational (or what one might more accurately call financially rational) agents by studying whether those who commit property crimes—illegalities that offer quantifiable monetary rewards—do so in a manner consistent with that of other economic agents who make income-acquisition decisions under risky conditions. His empirical finding that higher probabilities of arrest and conviction reduce property crime lent support to a basic hypothesized implication of the model and provided early empirical evidence of the “deterrence hypothesis,” a relationship replicated frequently and now virtually taken for granted in crime economics (understandably so, since it essentially reflects the law of demand). Block and Heineke (1975) further developed the notion of criminal behavior as the result of a time-allocation problem, emphasizing that the utility functions of prospective criminals contain more than just wealth considerations and that, because criminal utility is indeed “multiattributed,” it becomes more difficult, short of overly simplifying assumptions, to make many definitive theoretical predictions about criminal behavior and deterrence. Ultimately, the most useful insights for policy would have to come from empirical analysis of criminal activity.

B. Further Extensions, New Emphases

1. Legitimate Income Opportunities Becker’s economic model of crime in its basic form offers rich insights. A potential criminal identifies some psychic or monetary benefit available through illegal activity, faces a direct cost of this illegality in the form of an expected sanction, and potentially incurs an opportunity cost in the form of gains he could have obtained by doing something legal instead. As the earliest economic modelers demonstrated, we can address a number of issues, and predict a number of rela...

Table of contents

• Cover
• Title Page
• Copyright
• Dedication
• Contents
• Preface
• Acknowledgments
• Part one: Offender Behavior
• Part two: Victim Behavior
• Epilogue
• References
• Index