Economic models of crime and punishment

Social Research, Summer, 2007 by John J. Donohue, III

OVER THE LAST 45 YEARS, THREE MONUMENTAL STORIES HAVE dominated the national American crime scene. * The first was the run up in crime in the 1960s as a number of social forces converged into a perfect storm of increased criminal activity. These forces included the coming of age of the baby boomers and the accompanying and interrelated stresses of the massive baby boom cohort entering its high-crime years at a time of rebellion and strife over racial injustice and the Vietnam War. Moreover, the youth counterculture fueled a growing black market for illegal drugs, and an ideology of permissiveness likely encouraged greater lawlessness and restrained effective criminal justice responses to the burgeoning crime rates. In 1968, the famed psychiatrist Karl Menninger wrote in his book The Crime of Punishment that "I suspect that all the crimes committed by all the jailed criminals do not equal in total social damage that of the crimes committed against them." A Time magazine review of Menniger's book captures a dominant strain of thought at that time:

   Judges before sentencing should be provided with psychiatric
   reports and (as in California) hand out only indeterminate
   sentences, the ultimate length to be decided by skilled penologists
   according to each prisoner's response to treatment. Penologists
   already agree that only about 15% of convicted people are so
   dangerous or hopeless as to require imprisonment. The new consensus
   is that many offenders should remain either in or close to their
   communities and be taught how to cope with life and work under
   close supervision ("A Psychiatrist Views Crime," 1968).

The major increase in crime in the United States set the table for Gary Becker's pioneering work on the economics of crime. Writing in the same year that Menninger published his book, Becker became an early advocate for increasing the costs of engaging in criminal activity, which was an important corrective to the somewhat Pollyannish opposition to punitive sanctions in the late 1960s. Becker's message started to powerfully influence criminal justice policy in the 1970s and provided the intellectual support for the second major story: the increasing harshness of the American criminal justice system over the last 30 years. The major elements of this increasing punitive sentiment were fueled by a somewhat one-sided focus on the punitive dimension of the economic model of crime: raise the price of an undesirable behavior, and you will get less of it. This approach led to an explosion in the prison and jail populations, propelled in part by another victory of the punitive element of the economic model of crime: the war on drugs. Similarly, the punitive message has carried over to a revival of the use of capital punishment, which was sustained in 1976 by the US Supreme Court after a brief moratorium and then used with increasing frequency in the early to mid-1990s.

The third major story--finally some good news--was the dramatic, abrupt, and widespread drop in crime that began in the early 1990s. For some, the story is a neat and tidy one: laxity bred crime in the late 1960s, and the criminal justice system's ultimate harsh response restored greater order. Others are convinced that none of the harsh measures--increased levels of incarceration, the war on drugs, greater reliance on the death penalty, and a more visible and aggressive police presence--had any impact on criminal behavior. To have any hope of teasing out the causal factors behind these dramatic events, one needs a sound theoretical framework, a sophisticated understanding of the empirical/econometric literature, and, equally importantly, a relentless commitment to a scientific search for truth rather than an eagerness to offer tidbits of empirical evidence as validation for particular pet theories. In this paper, I will try to sort through some of these issues while examining the development of the economic model of crime and punishment and the beliefs of those who subscribe to or strongly contest this model.

THE BECKER MODEL

In 1968, Gary Becker provided the modern, mathematical formulation of what is now generally considered to be the economic model of crime. Becker posits that criminals, indeed all individuals, are rational maximizers of expected utility. On the one side, criminal acts can generate benefits for perpetrators--for example, the utility they might derive from hurting someone they are angry with or the resources obtained through theft. On the cost side, society imposes sanctions, generally with uncertain probability, on those who commit crimes. The Beckerian rational calculator weighs the expected costs against the expected benefits, and if the first are lower than the second, the person commits the crime. From this very simple model, Becker emphasized that society could reduce the amount of crime by either lowering the benefits that criminals garnered from their illegal activities or by raising the costs that would befall them (or both).