Economics of Crime

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Economics of crime
A Report on the Economics of Crime in the UK
Economics of Social Policy

Raza Waheed

Executive Summary3
1.1: Aims and Objectives3
1.2: The Structure of the Report3
Section 23
2.1: The Two Main Sources of Crime Statistics3
2.2: How Have Levels of Crime Changed Over the Years4
2.2.1: Violent and Sexual Crime4
2.2.2: Property Crime5
Section 36
3.1: Positive and Negative Incentives6
3.1.1: Incarceration Effect8
3.1.2: The Market Model of Crime9
3.1.3: Supply of Offences10
3.2: Implications of Positive and Negative Incentives10
Section 411
Quantifying the Cost of Crime11
Table of Figures13

Executive Summary
* Crime rates in the UK and Wales showed an increase in crime till around 1995 where it peaked. * Over the last couple of years, there has been a relatively small change in the crime levels. * Vehicle related theft has decreased the most out of all crimes as it has gone down by 65%. * Positive and Negative incentives both reduce the net return on crime through a higher number of policing on streets and an increase in employment opportunities. * Criminals are rational and respond to crime by incentives. * The government should only intervene in the cost of crime where the marginal benefit is greater than the marginal cost.


1.1: Aims and Objectives
The main aims of this report is to examine the underlying trends in different types of crime and then to use economic evidence to illustrate the key findings by using positive and negative incentives. 1.2: The Structure of the Report

The structure of the report will be divided into three main parts. Section 2 will include data from the British Crime Survey 2009/10 showing recent trends in the incidence of crime and which types of crime have fallen the most. Section 3 of the report will then combine positive and negative incentives with the market model of crime and with the supply function of offences. Section 4 of the report will then argue the public policy for quantifying the cost of crime. Section 2

2.1: The Two Main Sources of Crime Statistics
The two main sources of statistics come from Police Recorded Crime and the British Crime Survey. The British Crime survey is a face-to-face victimisation survey in which residents in households in England and Wales are asked about their experience of crime in the past twelve months prior to interview. For the crime types and population it covers, the British Crime Survey provides a better reflection of the extent of household and personal crime than police recorded statistics because the survey includes crimes that are not reported to or recorded by the police. The figures of the British Crime Survey are also a better indicator of crime trends, because they are unaffected by changes in levels of reporting to the police, and in police recording practices. (Le Grand, Propper and Smith 2008). 2.2: How Have Levels of Crime Changed Over the Years

Long-term trends show that British Crime Survey crime rose steadily from 1981 through to the early 1990s, peaking in 1995. Crime then fell, making 1995 a significant turning point. The fall was substantial until 2004/05. Since then, British Crime Survey crime has shown little overall change with the exception of a statistically significant reduction of 10 per cent in 2007/08 (the lowest ever level since the first results in 1981). ( Crimes recorded by the police show a five per cent decrease compared to 2007/08.

Figure [ 1 ]: Percentage Change in British Crime Survey Offences, 1995 to 2008/09 Source:
This graph shows that all types of crime have fallen from 1995 to 2008. However theft from the person is not statistically significant. Vehicle related theft crime has fallen the most between 1995 to 2008/09...
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