Tuesday, December 23, 2008

"Rational" crime

In its simplest form, the rational model of decision-making assumes that people compare the net benefits and costs of alternative choices and choose the alternative with the highest net benefit. The model can be extended to consider long-term consequences, different ways of discounting the future, and other considerations. However, the model, especially when applied to this-or-that types of choices, essentially comes down to a cost-benefit calculation.

Economists use the rational framework, without much controversey, to examine consumer (demand) and producer (supply) behavior in markets. Economists, most famously Gary Becker, have also used this model to examine other aspects of people's behavior including criminal activity.

Conservatives implicitly rely on the rational model when they argue that more police and tougher sentences deter criminal behavior. The argument is simple. These actions increase the likelihood of getting caught and the penalties associated with crime and thereby raise the cost of crime. For someone who is on the margin between committing and not committing a crime, the increase in costs will be enough to tip the scales against engaging in crime. Enforcement and penalities are examples of direct costs of crime. In the rational model, when these costs go up, criminal behavior goes down.

Conservatives, however, seem to have more trouble grasping another implication of the model, involving indirect or opportunity costs. When deciding between two alternatives, a person is less likely to choose one alternative if the value of the other alternative increases. Applied to criminal decisions, this means that people are less likely to engage in crime if the value of legitimate actions increases.

In his 1968 Journal of Political Economy article on "Crime and Punishment: An Economic Approach," Becker wrote (p. 177),

There is a function relating the number of offenses by any person to his probability of conviction, to his punishment if convicted, and to other variables, such as the income available to him in legal and other illegal activities, the frequency of nuisance arrests, and his willingness to commit an illegal act...

...a rise in the income available in legal activities or an increase in law-abidingness due, say, to "education" would reduce the incentive to enter illegal activities and thus would reduce the number of offenses.

The rational model predicts a link between economic and criminal activity. When the economy sours and legitimate money-making opportunities dry up, criminal activity is likely to increase.

A New York Times article this morning on shoplifting supports this analysis. It reports that,
As the economy has weakened, shoplifting has increased, and retail security experts say the problem has grown worse this holiday season. Shoplifters are taking everything from compact discs and baby formula to gift cards and designer clothing.

Police departments across the country say that shoplifting arrests are 10 percent to 20 percent higher this year than last.

The article identifies several other contributing factors, all of which fit within the rational framework.
Much of the increase has come from first-time offenders... But the ease with which stolen goods can be sold on the Internet has meant a bigger role for organized crime rings, which also engage in receipt fraud, fake price tagging and gift card schemes, the police and security experts say. And as temptation has grown for potential thieves, so too has stores’ vulnerability.

'More people are desperate economically, retailers are operating with leaner staffs and police forces are cutting back or being told to deprioritize shoplifting calls,' said Paul Jones, the vice president of asset protection for the Retail Industry Leaders Association.

Acknowledging that bad economic conditions contribute to crime is neither a capitulation to lawlessness nor an argument against pursuing other policies. Instead, it provides us with a better understanding of one of the factors--there are many others--behind people's behavior.

A rational analysis suggests that people, business owners, and law enforcement will need to be more vigilant during the tough economic months ahead.

1 comment:

james said...

As a business owner, I accept the fact that the rate of shoplifting crimes is increasing, especially during this tough times. I can do so little about that. I will focus all my attention on prevention instead, where I am mostly in control. The hiring of trustworthy and competent employees and use of state of the art loss prevention devices.