The Economics of Crime Since Gary Becker’s seminal article in the late 1960s, the economic analysis of crime has blossomed, from an interesting side field within law and economics, into a mature stand-alone subdiscipline that has been embraced by many well respected academic economists. Wide-ranging and accessible, this is the most up-to-date textbook on the subject, taking current economic research and making it accessible to undergraduates and other interested readers. Without using graphs or mathematical equations, Winter combines theory and empirical evidence with controversial examples from the news media. Topics discussed include: • the death penalty • racial profiling • rational drug addiction and drug legalization • private crime deterrence • gun control • the privatization of prisons • juvenile crime • alternative social reforms to deter crime. By requiring no previous knowledge of economics, not only is this book a perfect choice for students new to the study of economics and public policy, it will also be of interest and accessible to students of criminology, law, political science, and other disciplines involved in the study of crime topics. By emphasizing the benefits and costs of social policy to deter crime, The Economics of Crime can be enjoyed by anyone who follows current public policy debate over one of society’s most contentious issues. Harold Winter is Associate Professor at Ohio University. His previous book Trade-offs: An Introduction to Economic Reasoning and Social Issues is available from University of Chicago Press (2005). The Economics of Crime An introduction to rational crime analysis Harold Winter Firstpublished2008 by Routledge 2ParkSquare,MiltonPark,Abingdon,OxonOX144RN SimultaneouslypublishedintheUSAandCanada by Routledge 270 Madison Avenue, New York, NY 10016 RoutledgeisanimprintoftheTaylor&FrancisGroup This edition published in the Taylor & Francis e-Library, 2008. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s ..... © 2008 Harold Winter All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system, without permission in writing from the publishers. BritishLibraryCataloguinginPublicationData A catalogue record for this book is available from the British Library LibraryofCongressCataloginginPublicationData A catalog record for this book has been requested ISBN 0-203-92746-X Master e-book ISBN ISBN10:0-415-77173-0(hbk) ISBN 10: 0-415-77174-9 (pbk) ISBN 13: 978-0-415-77173-3 (hbk) ISBN13:978-0-415-77174-0(pbk) To the professors who have influenced my thinking, and to the students I have influenced. You all know who you are. Contents Preface viii 1 Rational crime basics 1 2 Efficient punishment and fines 16 3 Prison and crime deterrence 26 4 The death penalty and crime deterrence 41 5 Race and crime 55 6 Private crime deterrence 68 7 Drugs and crime 82 8 Social reforms and crime deterrence 97 9 Conclusion: What economists do 111 References 117 Index 130 Preface The field of study known as the economics of crime is generally considered to have started with Nobel Prize winner Gary Becker’s seminal article published in 1968. When I first read Becker’s article in 1982, the economics of crime was an interesting subfield in the larger field of the economics of law, itself only a small field in the discipline of economics. Now, however, the economics of crime has matured into a stand-alone field that has been embraced by many well respected academic economists. And while anti-crime policy is one of society’s “big” social issues, widely debated in the media by politicians and by concerned individuals, it is not often that the economic approach to crime is brought into the forefront of the debate. You may think of asking an economist about the unemployment or inflation rate, or about the balance of international trade, but would you ask an economist to voice a professional opinion on the death penalty, racial profiling, or drug addiction? When I tell people I am writing a book on the economics of crime, the most common response I get is: What does economics have to do with crime? Well, economists have a lot to say about crime (and almost every other subject, for that matter). Currently, there exists a substantial body of scholarly work that is accessible primarily only to the scholars themselves. My main goal is to make some of this material accessible to a wider audience, creating a pedagogical tool for a topic in which there appears to be wide interest among students and others. This book is primarily targeted at students who are not economics majors, or for those who have little background in economics yet may be taking an economics issues or contemporary problems course. There are several disciplines that routinely focus on crime topics, such as sociology, public policy, and, of course, criminology. If professors in these courses want to offer their students an introduction to the economic approach to crime, there is little material to use that may not be intimidating to the students. My book highlights the way economists think about a controversial social issue such as crime, and presents the material in a succinct, easy-to-read, and (hopefully) enjoyable format. The main emphasis of my approach is to focus on the types of questions that economists raise. Economists have a way of identifying trade-offs that are not often considered by academics in other disciplines. Even though many of the theoretical economic models of crime are quite technical, there is always an intuitive core that can be pulled out and presented in an accessible manner. I plan not to shy away from some of the most difficult ideas, nor from some of the most controversial ones. Preface ix But regardless of how unique and interesting are the theoretical issues, there is also a large body of empirical work on the economics of crime. Generally, the important debates over empirical work do not really involve the opposing results of the studies. Instead, the debates primarily focus on the choice of data and statistical techniques. To fully appreciate these issues, the reader has to have some training in statistical analysis. With such a background, discussing how empirical studies differ can be an important and fascinating exercise. I’m going to assume, however, that the typical reader of this book does not have such a background. Even with a strong background in statistics, the substantial lack of consensus among empirical researchers can be overwhelming not only to students, but also to academics. For example, while there is a strong consensus among economists over the underlying theory behind the deterrent effect of the death penalty, there are extremely well respected scholars who greatly differ over the empirical verification of the theory. This is simply the nature of applying empirical analysis to complicated real-world social issues. But the reasons for this lack of consensus can be poorly understood by students or lay people. Thus, they may incorrectly infer that there is little value in applying economic reasoning to crime issues. I believe that readers who are fairly new to economic reasoning can be best served by being presented with concepts that offer the greatest consensus among economists, such as the notion of trade-offs. When I do discuss empirical studies, I focus on what the researchers are examining as opposed to how they are examining it. When I discuss empirical results, I usually emphasize the qualitative results over the quantitative results, but oftentimes present both, depending on the issue at hand. Furthermore, I do not present the results of any individual study as being definitive, only as being illustrative of the type of questions economists are trying to answer with empirical analysis. In Chapter 1 I provide a brief primer on empirical analysis to aid the reader in dealing with some of the empirical studies I discuss more formally. Professors who want to add more empirical content to the topics I discuss can easily do so with other readings that will complement my book. I include extensive references of papers I discuss and do not discuss in the text for the interested reader to pursue. To maintain accessibility, in presenting the material I use no graphs, no math, few statistics, and a few numerical examples when needed for ease of exposition. This book is meant to be a supplemental text, offering students a short but serious discussion of the key topics in the economics of crime. Nearly every topic I discuss has been dealt with in book form, so I make no claim to have covered these topics exhaustively. Furthermore, there are many economics of crime topics I simply do not discuss at all. But, to the best of my knowledge, unlike any other book, this book makes accessible a substantial and up-to-date body of economic research. Finally, throughout this book I do not take sides in any specific debate, and I offer no explicit policy advice. My own opinion about any of the issues I discuss is of no relevance here. Although the ultimate goal of policy analysis is to answer questions about how to resolve social issues, I primarily want to focus on the first step toward that goal – raising the appropriate questions about trade-offs. One last note for professors who are thinking about adopting this book for their course. Several reviewers of this book have suggested that it would be a x Preface more useful pedagogical tool if I offered comparisons between the economic and criminology approaches to crime issues. One early reviewer went so far as to suggest that I make such comparisons to demonstrate that economics offers a “better” approach to crime issues.