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4.
The Economics of Criminal Justice
Policy
– Allocating Criminal Justice Resources
R. Freeman (coursepack), “6. Crime Prevention Activities”
C. Fellows, G. Flanagan, S. Shedd, (coursepack), “Public and Private Goods” and “The
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A) Introduction
So far in the course:
Background.
Costs of crime = benefits of reduction. Economic model of behaviour.
Next:
How much crime to prevent? What types to prevent?
What methods to use?
Stop existing criminals. Prevent future criminals.
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Introduction cont’d
Governments have scarce resources
→ must make choices.
How do they choose?
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B) Politics and Government Decision-Making
Why do we have governments?
Fairness – to help those who are worse off.
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Actual Government Decision-Making
Bureaucrats, MPs/MLAs, ministers, editorial writers,
constituents, business leaders and organizations, union leaders and organizations, etc.
Bureaucrats and police → own goals and knowledge. Public → fear of crime, over-reactions, political
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News Article – Sask Party Demands More Police
“Police blamed a lack of resources and heavy call load
for a 30-minute delay responding to a 911 call.”
“We are always trying to set the optimum rate of
police officers on the street…”
Benefits of more police?
Reduced response times, reduced crime.
Costs not really discussed in the article.
Taxes higher.
Opportunity costs of reduced expenditures
elsewhere.
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Budget Process
Federal Government Direct Spending on RCMP, prisons, etc.
Provincial Governments Direct Spending on
Police, courts, prisons, etc.
Municipal Governments Direct Spending on Police, etc.
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C) Efficient Government Decision-Making
The efficient method involves cost-benefit analysis. Pick the choice that maximizes net social benefit
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1. Calculating $ Costs and Benefits
Must appropriately discount future costs and benefits. Must translate social costs/benefits into $-equivalents.
Direct costs and benefits are fairly straightforward.
$-cost on more police.
$-benefit of less stolen goods.
Indirect/opportunity costs are harder.
Cost of imprisonment for prisoners’ families? Benefit of less murders?
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2. Calculate Net Benefits and Decide
If a choice has social costs > social benefits → never pick it.
If two choices with net positive benefits
→ pick the choice with the highest net benefit.
If possible → pick ALL choices with
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Social Benefits and Costs
Social benefits/costs ≠ private benefits/costs due to
externalities.
Negative externalities = external cost borne by others.
Pollution.
Speeding and bystanders. Criminal damage due to
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Social and Private Costs
MCSOC = MCPRIVATE + external cost.
Private decisions ignore this → too much output. Government intervention is efficient.
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Positive Externalities
Positive externality = external benefit received by
others.
Lighthouses, education, vaccination. Private security.
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Social and Private Benefits
MBSOC = MBPRIVATE + external benefit.
Private decisions ignore this → too little output.
Example: private security.
Problem: free-riding.
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Externalities cont’d
Result: It is sometimes efficient for governments to
intervene.
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Private Choices of Crime Prevention
Locks, precautions,
alarms, guards, guns,…
Households/firms:
MBPRIV of crime
prevention.
Marginal benefits =
Δ benefits from 1 more unit. MB = ΔTB ΔQ Q of Prevention MBP $
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Private Choices cont’d
Households/firms:
MCPRIV of crime
prevention.
Marginal costs =
Δ costs from one more unit. MC = ΔTC ΔQ Q of Prevention MCP $
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Private Choices cont’d
Households/firms optimal decision where MBPRIV = MCPRIV. Q*PRIV MCP $ MBP Q
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Private Choices cont’d
Households/firms optimal
decision where
MBPRIV = MCPRIV.
Why not Q1 > Q*PRIV?
Q*PRIV MCP $ MBP Q Q1
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Private Choices cont’d
Households/firms optimal
decision where
MBPRIV = MCPRIV.
Why not Q1 > Q*PRIV? Why not Q2< Q*PRIV?
Q*PRIV MCP $ MBP Q Q2
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Private and Public MB
If external benefits of security: MBSOC > MBPRIV. Q of Prevention MBP $ MBSOC External Benefit
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Private versus Social Choices cont’d
Households/firms optimal decision where MBPRIV = MCPRIV. Q*PRIV MCP $ MBP Q MBSOC
SOCIAL optimal decision
where
MBSOC = MCPRIV.
At Q*SOC > Q*PRIV.
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Public Prevention
Result – we need:
QPUBLIC = QSOC – QPRIV.
Q*PRIV MCP $ MBP Q MBSOC Q*SOC Optimal QPUBLIC
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The Optimal Amount of Crime Prevention
Public prevention > 0 → Crime* < Crime (no public).
Should we have 0 crime?
Should we have 0 government intervention?
Where is Q*SOC?
Overall – how many police and prisons. Which crimes to focus on?
Cost-Benefit Analysis
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Changes in Costs of Crime Prevention
What if costs of crime
prevention ↑?
Quantity of Crime Prevention MC0
MB Q*
$
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Changes in Costs of Crime Prevention cont’d
Then optimal quantity
of crime prevention falls to Q**.
Quantity of Crime Prevention MC0 MB Q* $ MC1 Q**
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QUESTION – the Impact of Societal Changes
Child pornography: It is easier to produce and distribute due to the
internet?
It is much less tolerated?
How would these two changes work in terms of our
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Question
How would we show the impacts of an action going
from being criminal to being legal?
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CBA’s Cousin: Cost-Efficiency Analysis
Two choices, each ↓ crime by 10%.
Cost-efficiency: pick the cheapest method.
Benefits ratio is also the highest for this
Costs method.
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D) Which Crimes To Fight?
Different crimes → different benefits and costs
→ different amounts of prevention.
Murder vs. burglary?
Terrorism vs. shoplifting?
Maximizing net social benefits → focus on:
High MB (prevention), low MC (prevention).
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The Benefit-Cost Ratio Rule
Benefit-cost rule:
Look at the ratio : MB
MC 2 4 8 = = B B MC MB 4 6 24 = = S S MC MB MCS = 6 MBS = 24 Shoplifting MCB = 4 MBB = 8 Burglary MB/MC Marginal Cost Marginal Benefit
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The Benefit-Cost Ratio Rule cont’d
We can see that:
B B S S MC MB MC MB = > = 2 4
This is not a social maximum:
Shift 3 units ($12) from fighting burglary to
fighting shoplifting.
More burglary → loss of MB = $24 = 3 x 8.
$12 for shoplifting → 2 more units.
Less shoplifting → gain of MB = $48 = 2 x 24.
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The Benefit-Cost Ratio Rule cont’d
Conclusion: focus on crimes with a high benefit/cost
ratio.
BUT, can we easily measure MBs and MCs for each
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Which Neighbourhoods Should We Focus On?
47.20% 22.50%
5.50% 21.50%
Incident of Low Income
$30,582 $44,848
$71,406 $62,377
Average Household Income
38039 12406 6693 7731 Crime "Rate" 10,350 7,085 6,425 5,795 Population 3937 879 430 448 Total Crimes 3043 776 387 423
Total Crimes against Property
894 103
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Total Crimes against Persons
North Central Cathedral Whitmore Park Hillsdale 2004 Crime Totals
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Which Neighbourhoods Should We Focus On?
Should we reduce crime rate in each neighbourhood to
an equal rate?
Fairest?
But ignores costs → overall crime higher!
Should equalize MB/MC? → overall crime lowest. But, politics ...
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6) Prevention, Deterrence, and Punishment
If we had an extra $100 million, where should we put
it?
More police?
More prosecutors? Changing laws?
More prisons?
Parole violations no fewer with new rules,
study says
Dean Beeby, Globe and Mail, May 20, 2003
A pilot program that keeps a closer watch on paroled criminals … looks to be a flop….
(A) test program begun in March, 2002… requires parole officers to have a minimum of eight face-to-face meetings with paroled offenders each month. Previously, officers met with them two or four times a month…
After three months, 70 percent of offenders in the (test) program were back in prison… compared to 71 percent from the (control) group… Doubling the supervision appeared to have had no impact. More Cost
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1. Policing
Empirical studies → more police reduced U.S. crime in
the 1990s.
Therefore, MB > 0.
But, which type of policing:
Community policing?
Focused on specific criminal activity?
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2. Courts and Prisons
Recall the five potential reasons for punishment:
Incapacitation. Retribution/Vengeance. Rehabilitation. Compensation of victims. Deterrence. Specific deterrence. General deterrence.
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News Article: Deterrence and the YCJA
Do youths react rationally to deterrence?
The Supreme Court: the Youth Criminal Justice Act
does not aim at deterrence, but at rehabilitation.
The current federal government doesn’t agree:
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Courts and Prisons cont’d
Empirical studies: prisons do deter criminals → MB > 0.
But, certainty of conviction >>> a longer sentence. Levitt: too many criminals at too high a cost
→ MC > MB.
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3. Fines
Becker: fines (with proceeds given to victims) are
much more efficient than punishment.
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4. Restorative Justice
Restorative justice “views … crime as a violation of
people and relationships” and attempts to address “the repercussions and obligations created by harm, with a view to putting things as right as possible.”
Key:
Criminal held accountable, less likely to re-offend? Repair and restore – helps with closure?
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Examples of RJ
Victim-offender mediation. Sentencing Circles.
Family or Community Group Conferencing.
Related but different: diversion by police before we get
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5. Socioeconomic Change
Longer-term alternatives:
Pre-school and early childhood intervention. Family-based therapy for “difficult” children. Treatment programs for “juvenile delinquents”. Labour market interventions to raise job skills. Bribing people to finish high school.
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6. Legalization or Criminalization?
WAS illegal, now legal:
Alcohol, lottery tickets and other gambling, birth
control pills, abortion, various sexual acts, interracial sex, homosexual sex, sex outside
marriage, leaving your reservation without prior permission, etc.
WAS legal, now illegal:
LSD/opium/marijuana, sex with someone under 18,
gambling over the internet, dumping toxic waste, beating your wife, smoking in a classroom.
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In-Class Exercise (I)
Suppose you’ve been hired by the The Recording
Industry Association of America to use the economics of crime approach to reduce downloading.
How would you do this?
Think both traditional anti-crime policy and
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In-Class Exercise (II)
Is the prevention of downloading by the methods
described SOCIALLY optimal?
How would we decide what is socially optimal, as
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8) Conclusions
How should governments decide between various
options for fighting crime?
Cost-benefit analysis → select those options with
the highest B/C ratio.
