Answer to Question #234461 in Economics for Yoza

Question

What are the types of economic crime theories

Answer 1

The essence of economists' approach to crime analysis is the assumption that criminals act in accordance with positive or negative incentives, and that the number of crimes depends, therefore, on private and public resources devoted to law enforcement and other methods of deterring crime. Like any other economic theory, the “economic approach to crime” does not require all offenders to act solely on external incentives. It is quite enough that the behavior of a significant number of potential violators should at least approach the model of “external stimuli - criminal actions”. Economists believe their approach is applicable to a wide range of illegal activities, from tax evasion to murder.

Analysis of the proposal. The behavior of a potential offender is considered in models for optimizing the distribution of his time between legal and illegal activities. Criminals in these models appear as people who rationally maximize their expected utility. Their choice is influenced by the following main factors: the likelihood of arrest, conviction, and punishment; penalties; income from alternative types of legal and illegal activities; the risk of unemployment; initial level of well-being. When analyzing the influence of these factors on the behavior of potential violators, their attitude to risk should be taken into account: it has been proven that a strong preference for risk dampens the deterrent effect of sanctions. In general, however, economists agree that increased sanctions for crimes reduce crime rates by curbing the influx of new potential perpetrators, even if it has little effect on existing perpetrators.

Demand analysis. The behavior of consumers of criminal goods and potential victims of criminal violence has a strong impact on the activities of criminals. For example, the intensity of trafficking in illegal drugs or stolen property is directly determined by consumers who create direct or indirect demand for certain crimes. Even for those crimes that inflict pure harm on victims, there is a kind of indirect negative demand, which is the flip side of the positive demand of potential victims for security measures. By choosing means of self-defense (locks, safes, alarms, etc.), potential victims influence the proceeds of crime and, accordingly, change the “demand” for a crime. Since the optimal (from the point of view of the potential victim) spending on self-defense will increase as the crime rate rises, private protection is inversely related to public law enforcement.

Analysis of state regulation. Since crimes create external effects, the control over crime becomes a “public good”, individual self-defense is complemented by collective actions. As a result of state regulation, illegal income is taxed with a threat of punishment. In addition, the number of offenders is regulated by limiting their rights or by re-educating them. Since all methods of control are expensive, the “optimal” (from the point of view of society) number of offenses should not be zero. It should be set at a level where the marginal cost of each enforcement or prevention measure is equal to its marginal benefit. To apply this cost-benefit comparison approach, however, one must first decide how to assess the benefits of society. G. Becker and J. Stigler, in their works on the optimization of law enforcement, chose maximization of “social income” as a criterion for optimization, which is tantamount to minimizing the number of losses from crimes and from the costs of protecting order. On the basis of this approach, it is possible to find optimal combinations of the probability and severity of punishments for various types of crimes and offenses, as well as the optimal amount and structure of the costs of maintaining the police, courts, and correctional institutions. However, the choice of the optimal combination of the probability and severity of punishment will change if the social welfare function is not reduced to total income, but takes into account, as some experts suggest, for example, the impact of law enforcement on the social equity of income distribution. In addition, since the justice system is composed of the activities of various, relatively independent institutions, each of them may have its own optimization rules that differ from the criterion for maximizing public welfare.