Economics of crime

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Economics of crime is a model of economics that addresses the  impact of incentives on criminal behaviour, it also looks into possible way to lower crime. This model is often used to describe the cause of crime and also looks into the forever changing interactions between criminals and anti-crime measures; furthermore it also helps predicts and explain behaviour that is criminal in nature. The model was introduced by Gary Becker in 1968. Economist study crime, the criminal, system and crime prevention.[1]

The model

The model looks at Crime as an economic activity. The definition of crime covers all violations including felonies like murder, robbery, assault, tax evasion and traffic and other violations.[2]  The model was published in the Journal ‘Gary Becker#Crime%20and%20punishment|Crime and Punishment: an Economic Approach”. This is regarded as the first rigorous analysis done by an economist in this way. The Rational choice theory|rational Choice framework is used to explain the motivation behind any crime. An individual looks at the gains that are expected and the losses that are expected if a crime is committed and if the gains outweigh the losses then the crime will take place; if not then the crime is not committed. This is also shown in an equation form below:

(1-p)us + puf > u̲[3]


us Stands for Expected Utility if the crime is committed successfully

uf Stands for Expected Utility when crime is committed and the individual receives punishment

p Stands for the probability of the punishment

u̲ Stands for the level of utility when the crime is not committed.

An individual will only commit crime when the net expected gains from the crime, i.e. the left side is greater than the gains from not committing the crime, i.e. the right side of the equation.[3]

According to the model a criminal is a criminal as it is the most attractive alternative present.

Uses of Economic analysis in the field of Crime

Economic analysis also helps in understanding the nature of organised crime. From economics of organisation, it can be understood that one limitations of large size of firms is that it is harder to have control and monitor the working process. Same issue can come in criminal markets. Criminal organisations faces Economies of scale|informational diseconomies of scale. Which means that any information that is passed  on in written or typed formed can be used against the criminal organisation to make a cases

against themselves, in the court.[4]

This theory is supported by the study done by Peter Reuter and Jonathan B. Rubinstein.  Firms which are of Criminal nature tend to be small and the industry tends to be decentralised. The research found that the Crime industry is like a network of individuals and small firms that regularly do business with each other and sometimes cooperate for their mutual interest.[4]

Implications of the model

The framework has helped provide guidance for the evaluation of intervention. It answers economic questions like what works to control crime and what is worthwhile. Through the Cost Benefit analysis a set of rules was provided for answering the questions.

Policy Choice

Crime has been understood to be the caused by culture and social structure. The analysis of these root causes of crime gave policymakers a guidance. Before this theory there it was considered that the policy makers had very limited ability to change structural aspects of society. The economic model assumes that the observed behaviour is a result of the individuals’ choices which were influenced by perceived consequences; and not due to underlying social conditions. If these consequences of crime are changed by government policy then the behaviour change can followUser:Durga Nagori/sandbox#%20ftn1|.[1]In addition to this economics also includes a well-developed normative framework that helps define the public interest and lends itself to policy prescription.[1] The model has helped point out that the social costs that are associated with crime come from the cost of victimisation, of efforts to control crime and prevent crime.

Quantitative Methods

The normative framework,  came up by using statistical methods that is considered to be advanced and innovative. Economists use natural and field experiments which has given an understanding of the causes of crime, and estimate the efficiency of different policy tools.

Crime as rational choice

Before the economic model, the understanding of crime was that population could be divided into two groups: Good and Bad.[1] Following this view, the bad people commit crime unless they are in incapacitated, and good people are law abiding  .The model focuses on the choices available to the individual. The choices come from the consequences, which are different among individuals depending on the opportunities available to them. The model also includes the idea that programmes to improve legitimate life opportunities may have a deterrent effect through increasing the opportunity cost of time spent in the criminal activity or prison.[1] The model focuses on choices and consequences but it does not debar the ideas that character is also an important variable that may influence criminal involvement. The attempt rehabilitate criminals according to the model should focus more on changing the cognitive process or increasing the opportunities to get out of the industry.

Feedbacks and Interactions

The model shows individual behaviour and serves as a building block for a theory of aggregate outcomes. However, the system that shows crime related choices by individuals are connected to aggregates have not been fully worked out. It can be viewed that the criminal activity y done by an individual at a rate is limited by the activities of the justice system and private security measures. Through the political process the political body choses how much resources should be given to the justice system, the business and households make individual chooses as to how much private effort they would take to the prevention and avoidance of crime.

The feedback works in the following way:

  1.    If the capacity of the justice system to control crime is reduced by an increase in the crime rates, this will causes the severe of punishment to decline thus increase crime.
  2.    The increase in crime rate, may raise political salience in crime, which will lead to the criminal justice budget to increase and stricter sentencing, this will lead the crime rate to go down.
  3.    The rise in crime may cause greater private efforts of avoidance of victimisation and prevention, and this can again lead to changes in the public security provisions and crime patterns.

Thus the observed criminal activity is an outcome of a complex  system. Which makes it hard to make unambiguous predictions, or keeping track of all the relevant mechanisms.


  1. 1.0 1.1 1.2 1.3 1.4 Machin, Stephen; Marie, Olivier (2014-01-30). "Lessons from the economics of crime". Retrieved 2020-09-18.
  2. Becker, Gary S. (1968). "Crime and Punishment: An Economic Approach". Journal of Political Economy. 76 (2): 169–217. ISSN 0022-3808.
  3. 3.0 3.1 FutureLearn. "Rational Choice Model of Crime - Economics of Crime". FutureLearn. Retrieved 2020-09-18.
  4. 4.0 4.1 "Crime". Econlib. Retrieved 2020-09-18.

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