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Incapacitation and deterrent effects of prison

Between 1960 and 2010, the inflation-adjusted, per capita expenditure on corrections in the U.S. increased by 240 percent. (This includes the costs of prison operation, employment of prison, probation, and parole officers, and offender rehabilitation.)

Meanwhile, the per capita expenditure on police increased by about 50 percent, and expenditure on judicial and legal justice rose by 70 percent. Clearly, the increase in prison population came with a hefty price tag. But was it worth the price?

The crime-reducing effect of incarceration is arguably the most important component of the social gains from incarceration. Incarceration physically separates high-risk criminals from communities and prevents them from committing new crimes while in prison (“incapacitation effect”). Tougher sentencing laws and increased prison population may also lower crime by deterring potential criminals, who observe that serious crimes lead to serious penalties and adjust their expected cost of criminal activities (“deterrent effect”).

A better understanding on these two effects of incarceration on crime can be of great policy value. First, a better understanding on the magnitudes of the two effects can help us to predict whether more incarceration would be a cost-effective way to fight crime. As we saw from Week 2, incarceration costs a lot more than other forms of punishment. (In the U.S., the annual, per-inmate cost of incarceration is about eight times as large as the cost of community supervision.) Thus, if incarceration reduces crime mainly by incapacitating criminals with little deterrent effects, fighting crime by incarcerating more criminals would soon become very costly. On the other hand, if the deterrent effect of incarceration is large, tougher sentencing laws can be a cost-effective crime-fighting strategy, since only a few will actually commit crime and be sent to prison.

Second, the magnitude of the deterrent effect can tell us about the empirical relevance of the rational choice model of crime. Recall how the rational choice model describes a potential criminal’s decision to offend or not based on expected gains and losses from crime. Thus, if analysis on data on crimes and criminals indicates strong deterrent effects, we can be more confident that the rational choice model can be helpful in understanding and predicting individuals’ criminal behaviors. On the other hand, the rational model does not tell us much about the extent of incapacitation effects of prison, but perhaps we do not need an economic theory to understand how locked-in criminals cannot commit new crimes while in prison.

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Economics of Crime

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