The economics of crime

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Economics of crime deals with the effect of incentives on criminal behaviour and the possible measures to reduce crime. Economic models not only predict and explain the behaviour of criminals, but can also be used to describe the causes of crime and the dynamic interaction between criminals and anti-crime measures.

Insight in the impact of incentives on criminal and terrorist behaviour is of major relevance for urban planners since criminals and terrorists will most likely alter their behaviour in reaction to taken security measures in order to fulfil their goals.

Behaviour of criminals

The standard economic model of crime is introduced in 1968 by Nobel Prize laureate Gary Becker[1]. His work radically changed the way of thinking about criminal behaviour by demonstrating that not so much mental illness and social oppressions, but individual rationality, determines whether a person engages in criminal activities or not. Becker's rational criminal decides whether or not to commit crimes based on a cost-benefit analysis aimed at maximizing utility[2].

Based on the assumption that the individual preferences are constant, rational choice theory[3] can be used to predict how changes in the probability and severity of sanctions and in various socio-economic factors may effect the amount of crime[4]. The types of gains depend on the type of crime and the individual criminal: some are monetary gains, others are physical. Examples of cost are material cost, psychic cost (guilt, anxiety, fear), expected punishment cost and opportunity cost.[4]

Limits to the rational choice theory

Within the scientific world, there is an ongoing debate if the economic model of crime is in conflict with other theories of crime and fully explain criminal decision-making. This debate was initially centred around the question how rational a criminal really is, referring to the fact that the 'rationality' criminals possess is actually 'bounded' or 'limited'[5]. Criticisers of rational choice theory wonder if potential offenders indeed have sufficient information to calculate the outcomes of their acting, and others stress out that the motivation, identity and surroundings of a criminal are also important factors that explain criminal behaviour[6]. They underpin this with the example of an individual who lives a certain 'hedonistic' life style (e.g. a member of an urban street gang or a drug addict), and hence will unlikely consider a legitimate job since such a person does not only needs 'fast cash', but also has a reputation to uphold[7].

As a result of the above mentioned debate, more recent economic approaches are based on the behavioural approach, which proposes a decision model comprising cognitive and emotional decision systems. According to this approach, a criminal is not irrational but rather ˜ecologically rational, outfitted with evolutionary conserved decision modules adapted for survival in the human ancestral environment (Winden and Ash, 2009)[8].

Socio-economic causes of crime

Since the 1970s, economists contributed in explaining and validating the traditional socio-economic determinants of crime such as unemployment, education, inequality, social networks, age and socio-economic background. Based on Buonanno's (2003)[9] review of the economic contributions, it can be concluded that crime is closely related to:

Riots often are accompanied with vandalism, such as arson
  • poverty,
  • social exclusion,
  • wage and income inequality,
  • cultural and family background,
  • level of education and,
  • other economic and social factors.

Although the relationship between crime and unemployment is not unambiguous and unclear[9], a study by the economists Lochner and Moretti (2001)[10] argues that the impact of education on crime is so strong, that, in fact, 1 percent increase in high school completion rate of all men ages 20-60 would save the United States as much as USD 1.4 billion per year in reduced cost from crime incurred by victims and society at large (p.31). The economists Glaeser and Sacerdote (1999)[11], find that crime rates in big cities in the US are much higher than in small cities or rural areas due to the fact that families are much less intact in cities (45 percent), there are higher benefit levels in cities (26 percent) and lower probability of arrest (12 percent). It has to be noted, however, that the economic crime models focus more on property crimes such as theft, and not on crimes like murder and rape[12].

Interaction of anti-crime measures and criminal behaviour

Policy makers, including urban planners, are increasingly taking interest in two types of dynamic interaction effects between anti-crime measures and criminal behaviour. The first type of interaction is called ˜crime displacement" and the other is ˜diffusion of crime".

Crime displacement

Crime displacement is the relocation of crime from one place, time, target, offence, or tactic to another as a result of some crime prevention initiative (Guerette, 2009)[13]. At worst, crime displacement can lead to more harmful consequences, for example, when there is a shift to more serious offences or to similar offences that have more serious consequences. However, according to the American criminologist Guerette, displacement can in some cases still provide some benefit. Crime, for example, can become less serious (e.g. petty thefts in stead of robbery), lower in volume and less impactful on the community due to a

  1. redistribution of the concentration of crime,
  2. the relocation of the crime or a
  3. transfer away from vulnerable groups of the population.

Whether displacement occurs is largely determined by three factors: offender motivation, offender familiarity, and crime opportunity[13]. Career criminals and drug addicts are more likely to continue to act criminal than marginal offenders after a response by anti-crime agents. Furthermore, offenders are more likely to relocate their behaviour to targets, places and times with which they are most familiar with. Finally, the presence of crime opportunities determines when and where displacement occurs.

Diffusion of crime

Diffusion of crime entails the reduction of crime (or other improvements) in areas or ways that are related to the targeted crime prevention efforts, but not targeted by the response itself[13]. For instance, implemented security measures targeting commercial burglary may also achieve an added reduction in shoplifting. As with displacement, diffusion of benefits can occur in many forms. Spatial and target diffusion occurs when areas or other crime targets near the intervention zone also experience a reduction in crime. Temporal diffusion occurs when other time periods experience a reduction in crime, even though the intervention was not applies during those times. The example, mentioned above, is an example of crime type diffusion.

Policy implications

The American criminologist Guerette (2009) points out that crime displacement and diffusion of benefits have many implications for policing projects, and that any policing project should be well-researched in order to identify the likelihood of displacement and diffusion[14].

Related subjects

Footnotes and references

  1. Becker, G. (1968): Crime and Punishment: An Economic Approach. Journal of Political Economy. No. 76, p. 169-217.
  2. Utility is a representation of preferences over some set of goods and services(Source: Wikipedia).
  3. Rational choice theory is a framework for understanding and often formally modelling social and economic behaviour. It is at the heart of modern economic theory and in the disciplines contiguous to economics, such as some parts of political science, decision theory, law and history that have adopted the theory as their model of decision making (Source: Ulen, T. S. (1999). Rational Choice Theory in Law and Economics). Rational Choice Theory can be considered as an attempt to explain all (conforming and deviant) social phenomenon in terms of how self-interest individuals make choices under the influence of their preferences (Source: Business
  4. 4.0 4.1 Source: Eide, E. (1999): Economic of Criminal Behavior.
  5. Wright et al. (2005): The Foreground Dynamics of Street Robbery in Britain. Advance Access Publication, 14 June 2005.
  6. See, e.g. Ulen, T.S. (1999): Rational Choice Theory in Law and Economics (p. 800); Winden, F., and E. Ash (2012): On The Behavioral Economics of Crime. Review of Law & Economics 8, 181-210; Wright et al. (2005): The Foreground Dynamics of Street Robbery in Britain. Advance Access Publication
  7. "In part, this helps to explain why street robberies often appear so irrational in the sense that they net little cash relative to the lengthy prison sentences that can follow." Source: Wright et al. (2005), p.13
  8. Source: Winden, F. van de, E. Ash (2009): On the Behavioral Economics of Crime. Center for Research in Experimental Economics and political Decision-making (CREED). University of Amsterdam.
  9. 9.0 9.1 Buananno, P. (2003): The Socioeconomic Determinants of Crime. A Review of the Literature. Working Paper Series, No.63. University of Milan.
  10. Lochner, L. and E. Moretti (2001): The effect of education on crime: evidence from prison inmates, arrests, and self-reports. NBER Working Paper no. 8605. In: Buananno, P. (2003): The Socioeconomic Determinantes of Crime. A Review of the Literature. Working Paper Series, No.63. University of Milan, p. 20-21.
  11. Glaeser, E.L. and B. Sacerdote (1999): Why is there more crime in cities?. Journal of Political Economy, No 111, pp. 507-548. In: Ibid.
  12. Hall, A. (2007): Socio-Economic Theories of Crime. Capella University.
  13. 13.0 13.1 13.2 Source: Guerette, R.T. (2009): Analyzing Crime Displacement and Diffusion. Tool Guide No. 10.
  14. See for more information: