The Economics of Crime and Punishment
In this section, I overview what I consider the three most important questions in current research on the economics of crime and punishment.
a. The Efficacy of Deterrence
The previous section discussed some potential policy tools that are available to the government to restrict crime. In principle, the government might attempt to limit the benefits to crime or raise the legal wage. However, historically the most important weapons against crime have been the direct tools of arrest and punishment. Before the
19th century, serious crimes were generally punished with death or other forms of severe corporal punishment (see Foucault, 1995). Lesser crimes were punished with public humiliation and lesser forms of corporal punishment. In some societies, fines were also used (even occasionally for murder).
After 1800, prisons became the standard form of punishment for almost all crimes, throughout Europe and the U.S.. There are several possible explanations for the evolution. Some theorists credit the increasing distaste of the public for painful, public physical punishment. Alternatively, other theorists have argued that the use of prisons was part of the common movement to restrict the power of the state in imposing punishment. This vein of thought emphasizes that the restrictions on cruel and unusual punishment were part of the Bill of Rights, which are generally meant to restrict the powers of government. A final theory is that incarceration makes more sense as professional criminals replace amateurs. When crimes are committed as random acts by generally productive persons, it is very costly to engage in incarceration. However, as crime became more professional, incarceration leads to social gains as criminals are incapacitated. The modern economics literature on the efficacy of forms of punishment began in the
1970s. Exemplars of this literature include the early work of Isaac Ehrlich (1973,
References: Akerlof, G. and J. Yellen (1994) "Gang Behavior, Law Enforcement and Community Values in Aaron, Mann and Taylor Eds., Values and Public Policy Archer, D. and R. Gartner (1984) Violence and Crime in Cross-National Perspective. Ayres, I. and S. Levitt (1998) "Measuring Positive Externalities from Unobservable Victim Precaution: An Empirical Analysis of Lojack," Quarterly Journal of Becker, G. S. (1968) "Crime and Punishment: An Economic Approach," Journal of Political Economy 76: 169-217. Blumstein, A. and J. Cohen (1979) "Estimation of Individual Crime Rates from Arrest Records," Journal of Criminal Law and Sociology 70: 561-585. Case, A. and L. Katz (1991) "The Company You Keep: The Effects of Family and Neighborhood on Disadvantaged Youths," NBER working paper. Chaikin, J. (1978) "Rand Prison Inmate Survey," Rand Working Paper WN-10107-DOJ. DiIulio, J. and Piehl A. (1991) "Does Prison Pay? The Stormy National Debate over the Cost-Effectiveness of Imprisonment," The Brookings Review Fall, 28-35. DiIulio, J. and A. Piehl (1995) "Does Prison Pay Revisited? Returning to the Crime Scene ," The Brookings Review Winter, 21-25. Donohue, J. and P. Siegelman (1998) "Allocating Resources among Prisons and Social Programs in the Battle Against Crime," Journal of Legal Studies XXVII: 1-43. Ehrlich, I. (1973) "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy 81: 531-567. Ehrlich, I. (1975) "The Deterrent Effect of Capital Punishment: A Question of Life and Death." American Economic Review 65: 397-417. Flango, V. and E. Sherbonou (1976) "Poverty, Urbanization and Crime," Criminology : 331-346. Foucault, M. (1995) Discipline and Punish. New York: Vintage Books. Freeman, R. (1992) "Crime and the Employment of Disadvantaged Youths," in A. Harrell and G Glaeser, E. and B. Sacerdote (1999) "The Determinants of Punishment," mimeograph. Glaeser, E. and B. Sacerdote (1999) "Why is there more crime in cities?" Journal of Political Economy, forthcoming. Glaeser, E., B. Sacerdote and J. Scheinkman (1996) "Crime and Social Interactions," Quarterly Journal of Economics Grogger, J. (1991) "Certainty vs. Severity of Punishment," Economic Inquiry 29: 297- 309. Grogger, J. (1995) "The Effect of Arrests on the Employment and Earnings of Young Men," Quarterly Journal of Economics Jarrell, S. and R. House, (1990) "Transient Crowding and Crime: The More Strangers in an Area the More Crime except for Murder, Assault and Rape," American Journal Kessler, D. and A. Piehl (1997) "The Role of Discretion in the Justice System," NBER working paper # 6261. Levitt, S. (1996) "The Effect of Prison Population Size on Crime Rates: Evidence from Prison Overcrowding Litigation," Quarterly Journal of Economics CXI (2): 319- Levitt, S. (1997) "Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime," American Economic Review 87(3): 270-290. Levitt, S. (1998a) "Why do increased arrest rates appear to reduce crime: deterrence, incapacitation or measurement error?," Economic Inquiry XXXVI (3): 353-372. Levitt, S. and A. Venkatesh (1998) "An Economic Analysis of a Drug-Selling Gang 's Finances," NBER Working Paper # 6592. Lott, J. (1998) More Guns, Less Crime. Chicago: University of Chicago Press. Mathieson, D. and P. Passell (1976) "Homicide and Robbery in New York City: An Economic Model," Journal of Legal Studies 6: 83-98. Posner, R. 91995) "What Do Judges Maximize?" in Overcoming Law, Cambridge, MA: Harvard University Press. Taylor, J. B. (1978) "Econometric Models of Criminal Behavior: A Review," pp. 35-82 in J.M Wilson, J. Q. and R. Herrnstein (1980) Crime and Human Nature. New York: Simon and Schuster. Witte, A. (1980) "Estimating the Economic Model of Crime with Individual Data," Quarterly Journal of Economics: 57-84.