Marginal Deterrence Is One of the Most Important Messages from the Economics of Crime. Explain the Role of Marginal Deterrence and Its Practical Applicability

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The 2002 crime figures for England and Wales comprised of two separate reports, brought together for the first time: (i) Crime statistics recorded by constabularies and (ii) The British Crime Survey (BCS), based on 33,000 interviews. The BCS is regarded as a more reliable measure of actual levels of crime because it includes experiences of crime that go unreported. The British crime survey of 2002 revealed: •Crime rates are stable, showing a slight 2% fall over since 2001 •In 2002, crime fell by 14% since 1999

•In 2002, crime fell by 39% since 1997

However, figures of this type need to be examined in detail. For example, these figures do not show whether the British Government has possibly ‘over spent' on crime. Looking at figures of this type do not show the relevance of economic techniques, i.e. marginal deterrence, which was first introduced by Stigler in 1970. This paper has taken a comprehensive, but limited view on the relevance of economics and crime.

Economics can have controversial ideas, and this can be expressed in terms of crime. Economic theory would suggest that there is an ‘optimal level of crime'. As Stigler (1970) argues, ‘there is one decisive reason why society must forego ‘complete' enforcement of the rule: enforcement is costly.' The extent of enforcement of laws depends upon the amount of resources devoted to the task. Stigler goes on to argue that society could make certain crime does not pay by paying enough to apprehend most criminals, but such a level of enforcement would of course be expensive.

The ‘direct costs' are the costs arising from the crime taking place, i.e. damage to property. The ‘elimination costs' include costs to society including funding the police force and the prison service. These costs may be calculated using the principle of opportunity cost. The net economic cost of crime to society is thus the difference between what gross domestic product would be if there were neither criminal nor crime prevention activities, and what GDP currently is, given the present state of crime and prevention (Sharp et al, 1996). Thus, there is an optimal level of crime for society. However, it is very difficult to justify to society that there is an optimal level of particularly devastating crimes like murder.

Gary Becker introduced a revolutionary paper in 1968 looking at the relationship of economics and crime. The paper discussed what determines the amount, and the type of resources used to enforce legislation. As a result of Becker's paper, the economic approach to criminal involvement rests on the assumption that most potential criminals are normal individuals. He describes criminals as ‘rational, self-interested agents whose behaviour is best understood as an optimal response to the incentives set by the government via expenditures on law enforcement and corrections.' (Becker 1968). Criminals are not ill or physically deformed, as nineteenth century criminologists believed.

As Becker (1968) argued, the criminal will commit a crime if the expected net benefit (utility) from committing the crime exceeds the benefit (utility) derived from legitimate activity.
The graph shows the rational decision available to the prospective criminal. The concave line shows the criminal is risk averse, but a straight line (criminal is risk neutral) or a convex line (criminal is a risk lover) could also be used in the argument. If a crime is committed then the criminal can either be at points A or B. At point A the criminal is 100% certain to be caught, and so their punishment in monetary value (L) is deducted from her wealth (W), and receives a utility of U(W-L). At point B, the criminal is 100% certain not to be caught and therefore the monetary value of the crime (G) is added to their initial wealth (W). As a result, the expected utility of the criminal can be derived as: E(U) = (1-Pc) [U(W+G)] + Pc [U(W-L)]

Line AB shows all the possible outcomes of utility of the criminal....
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