Economists Do It With Models

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The Economics Of Crime, Summarized In A Cartoon…

June 26th, 2009 · 5 Comments
Behavioral Econ · Decision Making · Just For Fun

A friend posted this on my Facebook profile, courtesy of rall.com:

Hee. This is particularly funny to me considering that I tutor for the LSAT. It also reminded me of a paper that I read a while back.

It’s unclear to a degree whether criminals are acting rationally- i.e. whether they are considering the real costs and benefits of an action and coming to the conclusion that yes, it’s the optimal choice to rob this bank, or yes, it’s the optimal choice to mug that little old lady. (Funny that in both of those situations there is a pretty good chance of getting both cash and candy.) When lawyers and/or economists (law and economics classes are becoming more common, which I think is awesome) talk about the concept of deterrence, they typically think that the potential criminal really is thinking ahead and doing some sort of net present value calculation. (Or even if they don’t think this is the case, they acknowledge that there is no way to deter those criminals who are just batshit insane and focus on what they can control.) The concept of deterrence is an attempt to set punishment in order to shift the outcome of the cost/benefit analysis to the “not worth it” side. There is even a concept known as marginal deterrence that aims to shift criminal behavior to less severe activities in the cases where they may not be able to be prevented entirely. (i.e. set punishment so that the criminal only kicks the old lady rather than throwing a brick at her. Isn’t the economics of crime morbid?)

Are criminals rational? David Lee and Justin McCrary argue “probably not, in a lot of cases” in their paper “Crime, Punishment and Myopia”. (In case you are curious, myopia refers to nearsighedness, so if you are acting myopically you are being short-sighted. Take that, SAT verbal.) They find a natural experiment as a result of the fact that legal punishments are generally much tougher once an individual turns 18 and is a legal adult. This would suggest that, if criminals were acting rationally, you would expect to see a. more crimes committed by minors (after adjusting for other factors), and b. less criminal activity within an individual once he turns 18 and the punishment increases. The authors of the study look at the second implication most closely but do not find the evidence that the change in punishment would suggest. They conclude that “potential offenders are extremely impatient, myopic, or both.”

Lesson learned: when the dude in the ski mask breaks into your house, economic principles are not likely to be nearly as helpful as a baseball bat or golf club. (Sidenote: I got mugged once. I tried to reason with the guy by kicking him in the groin. It didn’t entirely work, but it gave me time to get my house keys out of my bag- important since I was right outside my front door. How’s that for marginal deterrence?)

Tags: Behavioral Econ · Decision Making · Just For Fun

5 responses so far ↓

  • 1 Mike Visser // Jun 26, 2009 at 10:59 pm

    I haven’t read the paper you refer to, but I wonder to what extent they control for criminal opportunity. That is, as people get older, they tend to have more opportunities to commit crimes.

  • 2 Ron Beggs // Jun 30, 2009 at 10:26 pm

    Are criminals rational? Depends. Many variables influence the rationalness of committing a criminal act. With 15 years of LE experience I’ve interviewed hundreds, maybe thousands, of suspects and I’ve always asked
    “why?” and often try to explore their thought processes prior to committing their acts. Anecdotally, it seems that violent & petty criminals act with very little aforethought while high-level drug traffickers and white collar criminals do act rationally, if (a) we understand rational in the context of his/her individual reality at the time of the act and (b) we understand that ‘rational’ doesn’t necessarily mean ‘right.’ On a side note: I’m so done w/ people asking me if the economy is causing me to have an increased workload. NO! I’ve yet to see a laid off Ford engineer hit an old lady over the head and take her purse.

  • 3 g4m3th30ry // Jul 5, 2009 at 1:56 am

    Ron –

    Good points all – I think one of the myths that seems to persist in circles with people of decent intellect is there seemingly insistence that when something seems irrational to them, it must be irrational.

    Without looking at the rationality from the eyes of the agent causing the crime, it’s really not for others to decide the rationality or irrationality of the decision. It seems self evident that, aside from mental illness, depression and the the like, that if someone commits a crime, they have a belief they will get more utility from doing so than from not doing so.

    This is the same problem with analysis in international relations – too many complaints from the current pundits who claim to be experts about which leaders are rational and which aren’t.

    Truth is the same as is it with criminals – they are all rational (exception again mental illness). Simply because we don’t understand their reasoning doesn’t make it any less so.

  • 4 g4m3th30ry // Jul 5, 2009 at 1:57 am

    there – their (I should learn to read prior to posting…)

  • 5 moritz michel // Sep 14, 2010 at 5:16 am

    (please excuse my grammar – i am not a native speaker)

    …i just started working on a paper about incentives of organized crime. regarding my research up to now i am with ron so far (thank you for the insight).
    although drug addicts and sex offenders might act rational following their own set of preferences, white collar crime and criminal organizations act rational within the regular economic models – mostly given a minimum level of education.

    i agree with you on the fact that it is a good thing that law and economics classes are gaining importance…after all both sciences are very interdisciplinary and should never be isolated.
    howelse would we be able to differ between a drug-driven mugger or a profit-maximizing inside trader..?

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