Explain the Economic Rationale
Explain the Economic Rationale for the Supply of Crime, Show the Implications of this Rationale for the Design of Crime Deterrence Policies, and Assess the Empirical Relevance of this Rationale.The economic rationale for the supply of crime will initially be analysed using Becker's framework. The implications of his findings will then be used as a means of explaining how crime deterrence policies can be devised. The same procedure will then be undertaken for Ehrlich's model, with an assessment of the application of the model in addition to its empirical relevance. There will be a discussion on the merits of both of these frameworks using other papers by other economists.Gary Becker applied the principles of expected utility theory to explain the individual's decision to commit a crime. This decision to commit an offence is made rationally and is dependent on incentives. This model views crime as an economic activity that has rational, utility-maximising participants who only choose to commit an offence if the expected utility is higher than the utility from a legal activity. The number of times that an individual commits a crime can be represented by the following function:
This is because they are likely to want more proof of guilt if the consequence of a guilty verdict is so much harsher. In the case that the punishment is too severe, there may be a situation where more crime results as criminals may may as well commit a more serious crime if they will face similar consequences to a smaller crime. From this we can deduce that crime does pay as the gain form crime is smaller than the expected punishment. As a result, the design of any crime deterrent policy must take into consideration the costs and benefits of reducing crime (the optimal level of crime is not necessarily zero). Ehrlich concluded that the number of murders was far more responsive to changes in the probability of being caught rather than the probability of conviction and of executions. Therefore, it is the hardcore criminals who are do not participate in the labour force that policies should be aimed at. It then follows that this framework would not be relevant to an insane person (thus the motivation for a criminal to plea 'insanity'). Ehrlich also found that the participation in the labour force had a negative effect (although this was frequently insignificant), however the level of permanent income was positively correlated whilst the age effect had strong positive correlation with the murder rate. Thus when considering any policies it is essential to change the preferences of the criminals. Passel and Taylor made the observation that an increase in the execution rate may have the result of fewer criminals being convicted than before. Becker believed that fines ought to be used whenever possible, however this is not realistic due to the regressive nature of the punishment. The expected utility function can be represented like so:EU = pU (W-L) + (1-p) U (W+G) An individual that will not engage in any criminal activity will have a utility function where the expected utility will equal the utility of their initial wealth. If policies were devised so as to increase the probability of conviction, the amount of time an individual spends on crime would be expected to decrease (unless at a corner solution).
Common topics in this essay:
Gary Becker,
Looking Appendix,
WLT- FcT-,
Passel Taylor,
Carr-Hill Stern,
Michael Howard,
Relevance Rationale,
Unlike Becker's,
WLT- Wo,
supply crime,
expected utility,
Investigation' Grogger,
marginal cost,
becker's model,
illegal activities,
murder rate,
wc + wlt-,
probability detection,
level punishment,
utility function,
+ wlt-,
+ wc +,
expected utility function,
= wo +,
fall supply crime,
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