Download tragedy of the commons

Economics of Crime II
Econ 3670 Applications of Choice Theory
Roberto Martinez-Espiñeira
The tragedy of the commons in crime
• Crime prevention and public law
enforcement requires scarce resources
• How are these allocated?
• They are affected by the tragedy of the
commons, since there is commonproperty access to most of them
The tragedy of the commons in crime
• Police have common access to
prosecuting resources
• Prosecutors and judges have common
access then to prison space
• They do not pay the full price of
overcrowding the commons, just a
fractional price, while they get 100% of
the glory from giving tough sentences
The tragedy of the commons in crime
• Their dominant strategy is to contribute
to the overcrowding
• Resources are rationed on a first-comefirst-serve basis
• Other rationing mechanisms might be
used too
• Rich neighbourhoods and more
politically influential ones get more
resources
The tragedy of the commons in crime
• The overcrowding decreases the
effectiveness of the whole system
• In particular it reduces the deterrence
effect of the legal system (like in
Colombia now)
The deterrence effect of higher penalties
on crime
• Becker suggests that one of the ways
we have to deter crime is to increase
the penalties for crime if caught
• But does this affect the probability of
being caught, prosecuted, and/or
convicted?
The deterrence effect of higher penalties
on crime
• Stiffer sanctions change the behaviour of police
officers. When the only other option is punitive
punishment, officers might choose to handle
more offences "off-the-record."
• Stiffer sanctions change the behaviour of
criminals. When potential penalties rise,
potential criminals become more vigilant. And,
if they are apprehended, criminals will fight
harder to defend themselves. Criminal
defendants facing a potential death sentence
expend all available resources.
The deterrence effect of higher penalties
on crime
• Stiffer sanctions change the behaviour of
jurors. Reasonable doubt is a slippery
concept. Jurors’ demand for evidence
will vary with potential penalties
• Stiffer sanctions change the behaviour of
prosecutors, who have considerable
discretion with respect to what charges
are pursued in court.
• See Stonebraker’s (How Tough is too
Tough?) and Andreoni (1995)
•
Andreoni, J. (1995), 'Criminal Deterrence in the Reduced Form: A New Perspective on Ehrlich's
Seminal Study', Economic Inquiry 33(3), 476-483.
Why and how to reduce crime
• The benefits of committing a crime
include a variety of monetary and
psychic pleasures
• criminals also incur opportunity costs for
the time and energy devoted to their
activity and they face an expectation of
being caught and jailed/killed
• rational criminals will choose to pursue
crime as long as its marginal benefit
covers its marginal cost
Why and how to reduce crime
• One way to reduce crime is to
manipulate this balance
• But why would we want to do that?
• Because most costs are external costs
• They are ignored by the criminals so
they supply much more crime than it
is efficient
• Because criminals largely ignore these
costs to others, they produce inefficiently
high amounts of crime
Why and how to reduce crime
• Should I steal $100 from you?
• If the MB of theft to me is $100 and I
estimate my MC as $80; I'll steal: private
MB > private MC
• The theft creates $20 of net value for me
• My $20 gain is more than offset by your
$100 loss, however that does not
necessarily enter my calculations
Why and how to reduce crime
• Should I steal your laptop from you?
• If the MB of theft to me is $300 (that I get
by selling the laptop second hand) and I
estimate my MC as $200; I'll steal:
private MB > private MC
• You would lose much more, because
your laptop might contain your 3670
essay!
• That is why in many places there are
institutions that help owners of stolen
things buy them back from the thieves
Why and how to reduce crime
• My stuff is worth to me more than
what is worth to the thief
• There is the root of the inefficiency!
Why and how to reduce crime
• Of course many of the external
costs of crime have to do with
private protection costs
• By the way, is it better to walk
around with visible guns or to have
the right to concealed guns?
Why and how to reduce crime
• There are several ways to protect your
home or car from theft
• One is to do so in a visible way (a
burglar alarm with a sign posted on your
front door, advertising its presence)
• Thieves are then more likely to seek
easier, softer targets, that is, houses and
autos without such visible protection
Why and how to reduce crime
• According to Steven Landsburg
"When your neighbor installs a
burglar alarm, thoughtful burglars
are encouraged to choose a
different target – like your house,
for example. It's rather as if your
neighbor had hired an exterminator
to drive all the vermin next door."
Why and how to reduce crime
• In contrast, hidden protections against
break-ins and theft work better
• If the robber does not know which cars
or houses are defended against his
depredations, but knows for sure that a
significant number of them are, then he
is more inclined to leave this field entirely
• Here, each potential victim who protects
himself protects his neighbors, and
indeed, all others, as well
Why and how to reduce crime
• That is why “Lojacks” have worked
to so well to protect all cars (owners
of Lojacks generate external
benefits, while owning a “Club” bar
generates external costs)
• concealed cell phone ownership
has reduced risks for everyone
Why and how to reduce crime
• So if there is too much crime for
efficiency…
• We should decrease the expected
net benefits of crime
• That is precisely what the criminal
justice system is designed to do
• By imposing penalties we raise the
MC of crime to its suppliers and
decrease the equilibrium quantity
Drop of crime in the 1990s
• From a positive perspective, differences
in crime across time or across
individuals should be attributable to
differences in the costs and benefits of
crime
• For example, after a steady rise during
the 1970's and 1980's criminal activity
fell significantly in the 1990's
• According to economist Steven Levitt,
shifts in costs and benefits tell much of
the story
Drop of crime in the 1990s
• On the benefit or demand side
Levitt finds that the strong economy
of the 1990's explains a small, but
significant part of the decline
• As the economy grew and the job
opportunities multiplied, potential
criminals shifted from illegal to legal
means of support
Drop of crime in the 1990s
• A strong economy would decrease the
number of crimes related to theft
(robbery, auto theft, burglary, …) not
things like murder or rape
• Is this totally true???
• Additionally, Levitt reminds us that many
of the activities linked to crime are
normal goods (going to night clubs,
owning a car, drinking alcohol,…)
Drop of crime in the 1990s
• However, changes on the supply or MC
side of crime seem to have been more
critical
• First, there were significant increases in
the number of police officers on the
streets
• Second, incarceration increased
substantially, which impacted crime both
by removing potential criminals from the
streets and by acting as a potential
deterrent to others
Drop of crime in the 1990s
• By 2003 the U.S. led the world in terms
of the percent of its population behind
bars (701 per 100,000 residents,
followed by Russia at 603 per 100,000
residents)
• The U.S. rate is more than four times
higher than the median rate across the
world. As a comparison, the rate in
Canada was 116 prisoners per 100,000
and rates in Western Europe ranged
from 59 (Norway) to 141 (England)
Drop of crime in the 1990s
• Although increases in police and
imprisonment both matter, Levitt's
research fingers increased police
presence as being the more cost
effective approach
• When measuring this effect, one should
carefully consider that more police
resources decrease crime, but crime
increases police resources
Drop of crime in the 1990s
• Levitt identifies another and far more
controversial factor for decreased crime
rates: legalized abortion
• unwanted children are more likely to
commit crimes, he argues that legalized
abortion has cut the number of unwanted
children
• The historical timing is what we should
expect. Roe vs. Wade, the landmark
case that led to increased abortion, was
settled in 1973
Drop of crime in the 1990s
• If abortion cuts crime, the effect should begin to
appear about 18 years later; this is exactly what
happened
• Moreover, differences in abortion rates across
states correlate with differences in crime rates
in subsequent years.
• Levitt does not tout abortion as a particularly
efficient weapon against crime; he clearly
prefers additional police officers for that. He
merely notes that increased abortion accounts
for a significant chunk of the slowdown in
criminal activity
Drop of crime in the 1990s
• Levitt also mentions the receding
“crack epidemic” as a cause for the
decline in crime